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How  to  Draft  and  Enforce 
a  Conditional  Sale 


odern  American  Law  Lecture 


Blackstone  Institute,  Chicago 


HOW  TO  DRAFT  AND  ENFORCE 
A  CONDITIONAL  SALE 


BY 

AKTHUK  W.  BLAKEMOKE,  A.B.,  LL.B. 

iv> 

OF    THE    BOSTON    BAR 


One  of  a  Series  of  Lectures  Especially  Prepared  for  the 
Blackstone  Institute 


BLACK  STONE     INSTITUTE 
CHICAGO 

Copyright,  1915,  by  Blackstone  Institute 
Copyright,  1919,  by  Blackstone  Institute 
Copyright,  1921,  by  Blackstone  Institute 


ARTHUR  W.  BLAKEMORE 


ARTHUR  W.  BLAKEMORE 

Mr.  Blakemore  is  a  practicing  attorney  with 
offices  at  40  Central  Street,  Boston,  Mass.  His 
wide  experience  in  active  practice  since  1900  makes 
him  particularly  well  qualified  to  handle  the  very 
practical  subject  of  "How  to  Draft  and  Enforce  a 
Conditional  Sale." 

He  is  a  graduate  of  Harvard  College  and  Har- 
vard Law  School.  Mr.  Blakemore  also  studied 
for  a  time  at  the  Universities  of  Berlin  and  Heidel- 
berg, Germany. 

After  he  was  admitted  to  the  bar,  he  devoted 
his  attention  not  only  to  practice  but  also  to  the 
preparation  of  legal  articles  on  many  phases  of 
the  law  and  has  become  known  as  an  authority. 

Mr.  Blakemore  is  the  author  of  "Real  Prop- 
erty," in  MODERN  AMERICAN  LAW.  In  addition  he 
has  written  several  articles  in  the  Cyclopedia  of 
Law  and  Procedure.  He  is  the  author  of 
"Make  Your  Will,"  "Blakemore  and  Bancroft 
on  Inheritance  Taxes,"  "Gould  and  Blakemore 
on  Bankruptcy,"  and  has  prepared  articles  for 
several  other  publications. 

Along  with  his  other  activities  Mr.  Blakemore 
has  found  time  to  take  an  active  part  in  civic  enter- 
prises. For  a  period  of  five  years  he  has  served  as 
Alderman  of  the  City  of  Newton,  Massachusetts, 
where  he  resides. 


HOW  TO  DRAFT  AND  ENFORCE 
A  CONDITIONAL  SALE 

By 
ARTHUR  W.  BLAKEMORE,  A.B.,  LL.B. 

An  offer  may  be  received  for  purchase  of  goods 
from  a  customer  whose  credit  is  not  of  the  best  or 
cannot  be  ascertained.  The  buyer  either  will  not  con- 
sent, or  is  unable,  to  pay  for  the  goods  on  delivery. 
Rather  than  lose  the  sale,  dealers  in  machinery,  fur- 
niture, or  other  personal  property  of  value,  are  fre- 
quently willing  to  take  a  business  risk  by  selling  to 
persons  of  uncertain  responsibility. 

The  question  will  then  arise,  how  can  one  best 
protect  himself  in  so  doing.  Usually  the  best  way 
is  to  make  some  arrangement  by  which  you  have  the 
right  to  retake  the  goods  if  the  buyer  becomes  in- 
solvent or  does  not  pay  as  he  agreed.  If  you  fail  to 
preserve  such  a  right  the  buyer  may  sell  the  goods 
and  put  the  money  in  his  own  pocket ;  or  if  he  does 
not  sell  the  goods,  they  may  be  taken  by  the  assignee 
or  trustee  in  bankruptcy  for  the  creditors.  They 
may  even  be  attached  by  some  other  creditors  who 
will  thus  obtain  a  prior  lien  upon  them.  In  all  these 
cases  your  chance  of  receiving  adequate  compensa- 
tion is  usually  slight,  for  you  become  a  general  cred- 
itor along  with  the  others,  while  if  a  conditional  sale 
is  properly  drawn  and  recorded,  where  recording  is 


6  MODERN  AMERICAN  LAW  LECTURE 

made  necessary,  it  reserves  to  the  seller  rights  su- 
perior even  to  one  to  whom  the  conditional  vendee 
has  wrongfully  sold,  although  the  buyer  from  the 
conditional  vendee  acted  in  good  faith  and  paid 
value  and  had  no  actual  notice  of  the  conditional 
sale.1 

It  is  the  purpose  of  this  lecture  to  show  how  a  con- 
tract of  sale  may  be  drawn  so  that  title  to  the  goods 
may  be  legally  reserved  until  payment  is  received. 
Not  only  will  the  proper  method  of  drafting  such 
agreements  be  indicated,  but  the  nature  of  the  con- 
ditional sale  contract  and  the  necessary  steps  to  be 
taken  after  it  has  been  drawn  will  be  discussed. 

THE  CONTRACT  OF  CONDITIONAL  SALE 

Conditional  sales  are  discussed  in  MODERN  AMER- 
ICAN LAW,  SALES,  Chapter  VI,  under  the  heading 
" Title  Reserved  for  Security."  Reference  should 
be  made  thereto  in  connection  with  this  lecture.  A 
number  of  the  general  principals  of  the  Law  of  Sales 
will  be  mentioned  here.  They  will  not  be  discussed 
at  length,  however,  for  they  are  carefully  presented 
by  Professor  Horack. 

A  contract  of  conditional  sale  is  an  instrument  by 
which  an  owner  of  personal  property — 

(1)  Agrees  to  deliver  the  personalty  to  the  buyer 
at  once ; 

(2)  Reserves  title  in  himself  until  the  purchase 
price  is  paid ; 

(3)  Agrees    that    completion    of    the    payments 
(which  are  usually  made  on  the  instalment  plan) 
will  render  the  buyer  the  absolute  owner  of  the  goods. 

Gamble  v.  Shingler,  96  S.  E.  705  (Ga.). 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  7 

CONDITIONAL  SALES— LEASES— MORTGAGES 

The  difference  between  a  lease  and  a  conditional 
sale,  in  the  strict  sense  of  those  terms,  is  that  in 
a  lease  the  parties  intend  the  article  leased  to  be 
returned  at  the  end  of  a  set  period.  The  user  pays 
certain  sums  called  rent  for  use  of  the  property.  In 
the  case  of  a  conditional  sale  the  parties  contemplate 
that  when  the  sums  stipulated  are  paid  the  property 
shall  belong  absolutely  to  the  buyer.  In  the  case  of 
the  lease,  the  sums  paid  are  simply  in  return  for  the 
use  of  the  property.  In  the  case  of  the  conditional 
sale,  the  sums  paid  are  part  payment  toward  the  pur- 
chase price. 

In  many  states  it  is  the  custom  to  draft  conditional 
sales  in  the  form  of  leases  on  the  theory  that  in  this 
way  the  buyer  most  clearly  acquires  no  claim  to  the 
title  until  final  payment  has  been  made.  Such  leases 
contain  a  clause  giving  the  so-called  lessee  the  right 
to  a  release  of  the  lessor's  rights  in  the  property  on 
final  payment.  The  courts,  however,  have  been  very 
quick  to  protect  the  buyer  in  the  case  of  leases  of 
this  character  by  declaring  them  to  be  what  they  are 
in  fact — conditional  sales.1  The  final  payment  of  the 
so-called  rent  results  in  the  transfer  of  the  title,  but 
this  cannot  be  the  effect  in  case  of  a  real  lease.  The 
courts  have  reached  this  result  without  the  aid  of 
any  statute.  In  some  states,  however,  statutes  have 
been  passed  which  include  such  leases  within  their 
operation. 

One  of  the  essentials  of  a  conditional  sale  is  that 
the  buyer  must  be  bound  to  take  title  to  the  property 
and  therefore  a  lease  providing  that  the  lessee  can  at 
any  time  return  the  property  is  not  a  conditional 

'See,  for  example,  Hartford-Connecticut  Trust  Co.  vs.  Puritan  Laun- 
dry Co.,  Ill  A.  149  (Conn.). 


8  MODERN  AMERICAN  LAW  LECTURE 

sale.  Whether  an  agreement  shall  be  construed  as  a 
lease,  a  conditional  sale,  or  a  mortgage,  the  courts 
usually  consider,  depends  upon  its  effect  and  not 
upon  what  the  parties  may  have  called  it.1 

But  it  should  be  borne  in  mind  that  a  real  lease 
may  be  used  and  the  clause  reserving  to  the  lessee  the 
privilege  of  a  release  from  the  lessor  on  payment  of 
the  last  installment  may  be  omitted.2  One  of  the 
large  shoe  manufacturing  companies  puts  out  many 
of  its  machines  on  real  leases.  This  transaction  has 
the  advantage  of  affording  maximum  protection  to 
the  manufacturer  as  the  tenant  thus  acquires  no 
interest  whatever  in  the  goods  themselves.  He  has 
not  even  an  inchoate  title,  and  has  no  right  to  sell 
the  leased  property,  nor  any  interest  which  his  cred- 
itors can  reach.  On  the  other  hand,  where  the  com- 
petition is  keen  it  is  usually  more  difficult  to  get  cus- 
tomers to  take  a  lease  than  to  sign  a  conditional  bill 
of  sale — the  lease  gives  the  lessee  no  prospect  of  ever 
acquiring  title  to  the  goods.  For  that  reason  you 
will  probably  prefer  to  have  a  conditional  bill  of  sale. 

A  sale  with  mortgage  back  differs  from  a  condi- 
tional sale  in  that  in  case  of  a  mortgage  the  original 
property  owner  becomes  the  debtor,  and  hence  stat- 
utes requiring  recording  of  mortgages  will  not 
usually  apply  to  conditional  sales.3 

A  sale  where  the  delivery  is  accompanied  by  a 
trade  acceptance  to  be  signed  by  the  buyer  is  not  a 

'Corbett  v.  Eiddle,  209  Fed.  811. 

'Outcault  Advertising  Co.  v.  Citizens'  State  Bank,  180  N.  W.  705 
(Minn.). 

'See  Dobson  Printers'  Supply  Co.  v.  Corbett,  82  So.  804  (Fla.).  As 
to  rule  in  Illinois,  however,  see  post  p.  21. 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  9 

conditional  sale  which  is  a  sale  subject  to  a  condition 
subsequent,  but  this  is  a  conditional  contract  of  sale 
in  which  the  buyer  does  not  even  obtain  a  special  title 
until  he  performs  the  condition  precedent  of  signing 
the  acceptance  or  paying  cash.1  This  is  a  nice  dis- 
tinction but  important  and  clear. 

CONDITIONAL  SALES  TO  MERCHANTS  FOB  RESALE 

It  is  very  difficult  to  protect  the  seller  when  he 
sells  to  a  retail  dealer  for  sale  in  the  ordinary  course 
of  business,  as  it  is  the  general  rule,2  crystallized  into 
law  in  the  Uniform  Act,3  that  in  such  case  one  who 
purchases  in  good  faith  from  the  retailer  for  value 
without  notice  has  a  clear  title,  even  though  the  goods 
were  sold  to  the  retailer  under  a  valid  conditional 
sale.  In  Michigan  there  is  a  special  recording  statute 
for  such  cases.4 

RIGHTS  UNDER  CONTRACT  ARE  ASSIGNABLE 

A  conditional  sale  although  it  does  not  pass  title 
still  gives  the  buyer  a  special  property  in  the  thing 
sold  which  he  may  sell  or  mortgage  while  the  seller 
under  a  conditional  sale  has  an  interest  which  he  also 
can  sell  or  mortgage.5 

WHAT  LAW  GOVERNS  THE  CONDITIONAL  SALE 

It  is  the  general  rule  that  the  law  of  the  place 
where  the  conditional  sale  was  made  determines  all 

'Firestone  Tire  &  Rubber  Co.  v.  Anderson,  180  N.  W.  273  (Iowa). 
*Spooner  v.  Cummings,  151  Mass.  313. 
*Section  9. 

«8ee  Becker  v.  La  Core,  179  N.  W.  344  (Mich.) 

•Worcester  Morris  Plan  Co.  v.  Mader,  128  N.  E.  777  (Mass.).     See 
also  King  v.  Cline,  194  P.  290  (Cal.  App.). 


10  MODERN  AMERICAN  LAW  LECTURE 

questions  of  the  validity,  nature  and  construction  of 
the  sale.  Questions  of  the  validity  of  a  sale  can 
usually  arise  only  where  the  rights  of  third  parties 
are  concerned  as  the  conditional  sale  is  universally 
upheld  as  between  the  parties.  If  a  sale  is  good  as 
against  creditors  in  the  state  where  it  was  made  it 
will  also  be  good  against  creditors  when  the  goods 
are  moved  to  another  state,  even  though  the  law  as  to 
validity  may  be  different  in  that  state.1  So  if  a  con- 
ditional bill  of  sale  is  made  where  recording  is  not 
required  it  would  still  be  good  in  another  state  to 
which  the  goods  may  be  removed  although  in  that 
state  recording  is  essential.  On  the  other  hand  if  the 
law  of  the  place  where  the  sale  is  made  requires  re- 
cording a  failure  to  record  will  invalidate  the  sale 
in  another  state  in  which  recording  is  not  required. 
Where  a  conditional  sale,  made  in  one  state,  con- 
templates or  provides  that  the  property  is  to  be 
delivered  or  used  in  another  state  the  construction 
and  validity  of  the  contract  is  to  be  determined  by 
the  law  of  the  latter  state.  Where,  however,  a  third 
person  purchases  goods  from  the  conditional  buyer 
his  rights  must  be  determined  by  the  law  of  the  place 
where  he  contracts  and  not  by  the  law  of  another 
state.  The  contract  in  question  here  is  not  the  orig- 
inal contract,  but  the  sale  by  the  original  buyer.2 

'Where  an  article  sold  on  conditional  sale  is  taken  by  the  buyer  to 
another  state  and  sold  to  a  purchaser  for  value  without  notice,  it  is  the 
general  rule  that  if  the  conditional  sale  was  properly  recorded  or  was 
valid  without  record  the  conditional  vendor  can  still  enforce  his  rights, 
but  the  rule  is  otherwise  in  Texas.  Willys-Overland  Co.  v.  Chapman,  206 
S.  W.  978  (Tex.  Civ.  App.). 

*For  authorities  on  the  above  rules,  reference  may  be  had  to  the  case 
of  Corbett  v.  Kiddle,  209  Fed.  811,  and  In  re  Wall,  207  Ted.  994. 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          11 

WHEN  TITLE  PASSES 

In  all  cases  the  question  may  be  vital  as  to  just 
when  the  title  to  the  goods  passed  under  the  terms 
of  the  sale.  In  determining  this,  the  usual  rules  of 
the  Law  of  Sales  should  be  applied. 

The  chief  question  is  when  the  particular  goods 
became  so  set  apart  to  the  buyer  that  the  seller  can- 
not withdraw  them  from  the  operation  of  a  condi- 
tional sale.  This,  as  with  any  other  sale,  depends 
upon  the  intention  of  the  parties  as  evidenced  bv  the 
circumstances  of  the  particular  transaction.  Where 
goods  are  delivered  to  a  carrier  for  shipment  to  the 
buyer,  ordinarily  they  become,  from  that  instant,  the 
property  of  the  buyer,  subject  to  the  rights  of  the 
seller  to  stop  them  in  transit  before  delivery  to  the 
buyer. 

There  is  another  rule  which  may  affect  this  ques- 
tion to  the  effect  that  where  anything  remains  for 
the  seller  to  do  in  respect  to  the  goods,  the  title 
does  not  finally  pass  until  it  is  done.  The  writer 
has  in  mind,  for  example,  a  case  where  machinery 
was  sold  to  a  worthless  contractor.  The  sale  was  not 
in  proper  form  to  protect  the  rights  of  the  seller, 
but  it  happened  that  the  contract  did  provide  that  the 
seller  would  set  up  the  machinery  on  arrival  at  the 
buyer's  property.  The  seller  never  had  set  it  up  and 
for  this  reason  he  was  able  to  retake  the  machinery 
as  against  creditors  of  the  buyer  who  had  attached 
it.  This  was  true  notwithstanding  the  seller  had 
already  sent  the  buyer  bills  for  the  purchase  price, 
and  thus  given  the  buyer  credit — usually  a  certain 
indication  of  the  intention  to  pass  title. 

In  a  true  conditional  sale  there  must  be  a  delivery 


12  MODERN  AMERICAN  LAW  LECTURE 

of  possession  with  the  intention  of  passing  immediate 
ownership,  often  called  a  special  title,  with  the  in- 
tention of  reserving  to  the  seller  only  the  general 
title  as  security.1 

FORM  OF  THE  CONTRACT 

The  form  of  the  contract  will  depend  upon  the 
nature  of  the  individual  business.  One  form  of  con- 
tract might  be  very  useful  for  a  concern  dealing  in 
furniture  while  at  the  same  time  very  awkward  for 
a  business  house  selling  machinery.  It  will,  of 
course,  make  a  difference  whether  the  business  is 
done  through  agents  on  the  road  who  cannot  be 
clothed  with  authority  to  bind  a  bargain,  or  whether 
the  business  is  all  done  in  a  store,  where  the  whole 
transaction  can  be  settled  and  decided  on  at  once. 
If  the  business  is  done  through  agents  it  is  usually 
best  to  have  a  form  drawn  up  by  which  the  buyer 
really  makes  an  order  for  the  goods  to  be  sent  to 
him  under  certain  conditions  while  the  order  does 
not  become  binding  on  the  seller  until  accepted  by  the 
home  office. 

This  gives  the  seller  an  opportunity  to  look  into 
the  credit  of  the  buyer  and  decide  whether  or  not 
he  desires  to  accept  the  offer.  The  only  difficulty 
with  it  is  that  it  leaves  the  buyer  the  right  to  revoke 
his  offer  or  order  at  any  time  until  it  is  finally  ac- 
cepted by  the  home  office.  But  it  is  usually  wise  for 
the  salesman  to  take  this  risk  in  a  large  sale  where 
the  seller  has  a  credit  department  better  able  to 
decide  on  the  financial  responsibility  of  the  buyer 
than  the  salesman. 

'Firestone  Tire  &  Rubber  Co.  v.  Anderson,  180  N.  W.  273  (Iowa). 
Conner  v.  Borland-Grannis  Co.,  128  N.  E.  317  (HI.). 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  13 

Where  a  salesman  simply  takes  an  order  he  does 
not  sign  a  contract  as  the  agent  of  the  seller  and  he 
therefore  can  act  as  a  subscribing  witness  if  the  sig- 
nature of  the  buyer  was  affixed  in  his  presence.  This 
may  be  very  important  where  a  witness  is  necessary, 
and  the  salesman  may  affix  his  name  either  at  the 
time  or  later  when  the  question  for  any  reason  may 
arise. 

The  acceptance  of  such  an  order  may  be  made 
either  by  indorsement  in  writing  on  the  order,  which 
should  be  signed  in  duplicate  and  one  copy  sent 
back  accepted  to  the  seller.  In  the  absence  of  this, 
sending  the  goods  after  receiving  the  order  will  be 
deemed  acceptance  of  the  order. 

It  seems  wise  to  have  some  formality  in  the  con- 
tract as  it  has  been  recently  held  that  the  buyer's 
signature  to  a  mere  delivery  slip  containing  the 
words  "  Conditional  sale.  Title  retained  by  W  until 
paid  in  full"  is  insufficient  to  show  that  the  parties 
had  agreed  to  a  conditional  sale  in  the  absence  of 
evidence  that  the  buyer  read  the  delivery  slip  or 
assented  to  its  terms,  especially  where  the  contract  of 
sale  was  otherwise  made.1 

ORDER  FORMS 

A  form  of  order  used  by  a  large  manufacturing 
concern  is  as  follows : 

ORDER  AND  AGREEMENT 
SALE  MACHINES 

UNION  MACHINERY  COMPANY   (GENERAL  DEPARTMENT), 

BOSTON,  MASS. : 
Please  ship  the  following  machines  to  the  undersigned  at  his 

'Utah  Ass'n  v.  Buller,  194  P.  127   (Utah). 


14  MODERN  AMERICAN  LAW  LECTURE 

factory  at in  accordance  with  the  terms  and 

conditions  hereinafter  stated: 


MACHINES. 

Total, 

Price. 

The  undersigned  agrees  to  purchase  from  you  the  machines 
hereby  ordered  and  to  pay  you  for  the  same  upon  demand  the 
sums  set  opposite  the  names  of  the  respective  machines  in  the 
list  above,  amounting  to  a  total  of Dollars. 

The  title  to  all  machines  hereby  ordered  shall  remain  in  you  at  all 
times,  although  possession  shall  have  been  given  to  the  undersigned, 
until  the  amount  of  the  purchase  price  of  all  shall  have  been  paid  in 
full;  and  on  default  in  any  payment  you  may  retake  possession  of  said 
machines  free  from  all  claims  whatsoever,  and  may  retain  as  consider- 
ation for  the  use  of  the  said  machines  theretofore  any  sums  which  may 
have  been  theretofore  paid  in  respect  to  said  machines.  The  said 
machines  shall  at  all  times  be  held  at  the  sole  risk  of  the  undersigned 
from  loss,  damage,  or  destruction,  and  they  shall  not  nor  shall  any 
thereof  be  removed  from  the  said  factory  of  the  undersigned  without 
your  written  consent  at  any  time  before  said  payment  in  full  shall  have 
been  made.  The  undersigned  shall  pay  all  taxes  which  may  be  assessed 
in  respect  to  said  machines  from  delivery  thereof  to  the  undersigned, 
upon  whomsoever  assessed. 

The  "machine  numbers"  of  the  machines  hereby  ordered  may 
be  entered  in  the  above  list  by  you  upon  or  after  acceptance  of 
this  order. 

Delivery  is  to  be  f.  o.  b.  your  factory  or  office  at 

and  freight  and  transportation  charges  on  said  machines  from 
your  factory  or  office  shall  be  paid  by  the  undersigned. 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          15 

(The  detail  of  equipment  and  shipping  directions  may  be 
added  here  or  on  back  of  form.) 

Dated 19 

Signature  of  Applicant 

By 

Order  accepted,  Boston, 19 .... 

UNION  MACHINERY  COMPANY. 
Order  taken  by  By 


A  Form  Used  in  New  England.  The  following 
form  of  bilateral  contract  is  in  use  in  the  New  Eng- 
land States.  The  directions  to  salesmen  should  be 
altered  to  fit  the  territory  covered : 

CONDITIONAL  BILL  OF   SALE 

THE  GOOD  ROADS  MACHINERY  COMPANY  (herein- 
after called  the  vendor),  a  corporation  duly  organized  by  law, 
whose  corporate  existence  is  hereby  admitted  for  all  purposes, 
in  consideration  of  the  agreements  hereinafter  set  forth,  hereby 

sells  and  delivers  to (hereinafter 

called  the  vendee),  the  articles  mentioned  in  the  following 
memorandum,  but  on  the  following  conditions,  viz. : — 

That  title  to  said  property  shall  remain  in  said  vendor  until 
all  the  agreements  of  the  vendee  are  fulfilled;  and  the  vendee 
for  himself,  his  heirs  and  assigns,  hereby  covenants  with  the 
vendor,  its  successors  and  assigns,  that  ....  will  pay  the  pur- 
chase price  and  notes  as  set  forth  in  said  memorandum,  which 
notes  are  given  only  as  collateral  and  may  be  sold  or  discounted, 
without  waiver  of  any  rights  under  this  contract,  and  will  also 
pay  all  taxes  and  liens  which  may  accrue  on  said  property; 
will  keep  it  in  good  order,  allow  proper  inspection,  order  and 
pay  for  all  necessary  repairs,  keep  it  insured  against  fire  in  a 
sum  satisfactory  to  the  vendor  (any  proceeds  of  said  insurance 
policy  to  inure  to  the  benefit  of  the  vendor  in  whatever  name 


16  MODERN  AMERICAN  LAW  LECTURE 

the  vendee  may  take  it  out) ;  and  will  not  alienate  it  or  remove 

it  from  the  state  of or  suffer  it  to 

be  attached  or  to  be  in  the  real  or  constructive  possession  of 
others. 

Upon  breach  of  any  of  the  above  covenants,  or  bankruptcy 
or  insolvency  or  general  sale  or  assignment  by  the  vendee  of 
business  or  stock  in  trade,  or  whenever  in  the  opinion  of  the 
vendor  the  property  is  threatened  with  loss,  damage  or  destruc- 
tion of  any  kind,  except  reasonable  wear  and  tear,  or  with  the 
imposition  of  a  lien  or  adverse  claim  of  any  kind,  said  vendee 
will  allow  and  assist  in  the  removal  of  said  property  and  for 
that  purpose  said  vendor  or  its  agents  or  attorneys  may  enter, 
re-take  and  remove  said  property  wherever  the  same  may  be 
without  liability  of  any  kind  and  at  the  expense  of  the  vendee 
up  to  the  cost  of  removal  to  the  vendor's  Boston  office.  No 
delay  in  removing  shall  be  construed  a  waiver  of  the  vendor's 
right  to  remove. 

UPON  THE  PAYMENT  OF  ALL  OF  THE  SAID  NOTES 
AT  MATURITY,  TITLE  TO  SAID  PROPERTY  SHALL 
THEREUPON  PASS  TO  SAID  VENDEE;  and  it  is  further 
expressly  agreed  that  all  sums  paid  before  said  final  payment 
are  rent  and  shall  be  kept  by  said  vendor  in  any  event  as  rent 
for  the  use  of  said  property  and  to  cover  its  decrease  in  market 
value. 

It  is  further  agreed  that  the  vendee  has  read  this  contract 
and  fully  understands  its  terms  and  has  received  a  copy  thereof ; 
that  this  contract  shall  be  recorded  by  the  vendee  and  at  his 
expense  whenever  recording  is  necessary  by  law. 

Witness  our  hands  this day  of 

192.... 

THE  GOOD  ROADS  MACHINERY  COMPANY, 

By 

Agent. 


(Acknowledgment  by  buyer  required  in  Connecticut.) 

STATE  OF  CONNECTICUT,  1 

COUNTY  OF J  S£ 

..19 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          17 

Then  personally  appeared  the  above-named 

and  acknowledged  the  foregoing  instrument  to  be 

free  act. 

Before  me, 


Notice  to  Salesmen 

This  contract  need  not  be  recorded  or  acknowledged  if  the 
goods  are  delivered  to  Rhode  Island.  It  must  be  recorded 
with  the  City  or  Town  Clerk  within  ten  days  where  the  buyer 
resides  in  Massachusetts,  Maine  and  Vermont;  and  must  be 
recorded  and  acknowledged  by  the  buyer  before  a  Justice  or 
Notary  or  Town  Clerk  in  Connecticut,  and  must  be  recorded 
in  New  Hampshire  within  twenty  days  after  its  date  with  an 
affidavit,  the  form  for  which  may  be;  obtained  from  the  Boston 
office.  Where  recording  is  necessary,  see  that  recording  precedes 
delivery.  On  payment  in  full,  see  that  contract  is  discharged 
of  record  to  protect  the  Good  Roads  Machinery  Company  against 
suit  by  other  creditors  of  the  buyer. 

A  Lease  Held  a  Conditional  Sale.  A  common  form 
of  lease  which  has  been  held  in  Massachusetts  to  be  a 
conditional  sale  notwithstanding  its  language,  is  as 
follows : 

Boston,  Feb.  28,  1892.  No.  1430. 

This  is  to  certify,  that  I,  Ella  Bassett,  of  Boston,  have  this 
day  hired  and  received  from  Smith  Brothers  the  property 
described  and  valued  in  the  following 

SCHEDULE 


Which  articles  are  to  be  used  by  me  at  No.  1070  Washington 
Street.  For  the  rent  and  use  of  which,  and  for  all  and  any  use 
of  other  goods  previously  leased  by  the  said  Smith  Brothers, 
to  me,  I  have  this  day  paid  to  the  said  Smith  Brothers,  as  rent 


18  MODERN  AMERICAN  LAW  LECTURE 

in  advance,  the  sum  of  One  Hundred  Dollars,  and  I  promise  to 
pay  them,  or  order,  the  sum  of  at  least  Twenty-five  Dollars 
per  month,  and  continue  such  payments  until  the  sum  to  be 
paid  for  the  use  or  rent  shall  equal  the  sum  stated  in  the  above 
schedule,  with  the  addition  of  six  per  cent  on  the  price  of  the 
goods  named  in  such  schedule;  and  further  six  per  cent  to  be 
added  to  balance  unpaid  at  the  end  of  the  first  and  every  suc- 
ceeding year,  and  to  keep  said  articles  insured  in  the  sum  of 
not  less  than  (depending  upon  amount  of  schedule)  for  the 
benefit  of  said  Smith  Brothers.  I  agree  not  to  remove  said 
articles  or  any  of  them  from  the  above  named  place  without 
the  consent  of  said  Smith  Brothers  thereto  in  writing;  and  if 
I  fail  to  pay  said  rents  as  above  stipulated,  or  if  I  remove  said 
articles  from  said  place,  or  sell  them,  or  underlet  them,  or 
suffer  them  to  be  attached,  mortgaged,  damaged  or  injured  or 
fail  to  keep  them  insured  as  aforesaid,  I  thereby  forfeit  all 
right  to  said  goods,  and  to  further  use  of  the  same  and  to  all 
moneys  paid.  I  further  agree  and  consent  that  said  Smith 
Brothers  and  their  agents  and  servants  may  at  any  and  all 
times  enter  into  and  upon  any  house,  room,  and  premises  occu- 
pied by  me,  or  any  room,  premises  or  home  occupied  by  a  tenant 
or  lodger  of  mine,  and  view  and  examine  all  said  articles  of 
furniture  and  to  remove  the  same  without  notice  or  demand 
and  without  being  deemed  guilty  of  any  trespass  or  wrong, 
and  in  case  of  such  removal  said  Smith  Brothers  may  sell  or 
appropriate  each  and  all  said  goods  and  articles  at  once,  as 
they  may  see  fit,  and  in  case  they  sell  or  appropriate  them,  or 
any  of  them,  they  may  apply  the  proceeds  after  payment  of 
cost  and  expense  of  finding,  moving,  keeping  and  selling  them, 
to  the  payment  of  any  rent  or  moneys  due  said  Smith  Brothers. 
I  remain  liable  to  them  for,  and  agree  to  pay,  any  balance  or 
sum  still  remaining  due  to  them  as  back  rent  or  otherwise.  It 
is  expressly  understood  and  agreed  that  the  title  to  each  and 
all  the  above  goods  and  articles  and  to  each  and  all  other 
goods  and  articles  at  any  time  leased  to  me  by  said  Smith 
Brothers,  remains  in  Smith  Brothers,  and  they  remain  abso- 
lute owners  of  all  the  same,  until  the  full  price  for  all  the 
goods  in  such  leases  is  fully  paid.  But  that  upon  full  payment 
to  said  Smith  Brothers  of  price  named  in  all  the  leases  and  all 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  19 

expenses,  including  expense  of  collection,  of  teaming,  finding 
or  getting  possession  of  them,  then  they  will  release  their  claim 
and  right  in  the  goods  above  leased  to  me. 

WITNESS  my  hand  and  seal  on  the  day  and  in  the  year  first 
above  mentioned. 

ELLA  BASSETT. 

IN  PRESENCE  OP 

JOHN  BAXTER. 

I  have  this  day  received  from  Smith  Brothers  an  exact  copy 
of  the  above  lease,  the  provisions  of  said  lease  having  been  fully, 
understood  by  me  before  signing. 

ELLA  BASSETT. 

CERTAIN  REQUIREMENTS 

The  essential  rules  as  to  the  requirements  of  a 
valid  conditional  sale  as  they  are  known  to  exist  at 
the  time  of  publication  of  this  Lecture  will  now  be 
set  out  as  conveniently  as  possible  in  alphabetical 
form.  In  some  states  statutes  provide  that  the  con- 
tract may  be  either  acknowledged  by  the  buyer  or 
proven  by  the  subscribing  witness,  and  in  such  states 
it  is  important  to  have  the  contract  witnessed,  as  it 
can  be  then  filed  or  recorded  without  any  acknowl- 
edgment by  the  seller. 

Statutes  of  many  states  contain  particular  require- 
ments as  to  conditional  sales  of  railroad  equipment 
and  household  furniture.  All  of  these  cannot  be 
given  here.  Reference  should  be  had  to  the  statutes 
and  decisions  of  the  particular  state  in  which  the 
contract  is  made,  or  into  which  the  goods  are  to  be 
sent. 

In  Virginia  the  original  contract  should  be  re- 
corded and  should  show  the  date  of  the  contract, 
amount  due,  when  payable,  and  description  of  the 
goods  and  the  name  of  the  buyer  and  seller.  In 


20  MODERN  AMERICAN  LAW  LECTURE 

a  very  few  states  an  oral  contract  of  conditional  sale 
may  be  enforced.  But  such  a  contract  should  not 
be  made  if  it  can  be,  avoided  on  account  of  the  diffi- 
culty of  proving  its  exact  terms. 

SIGNATURE 

In  most  states  it  is  sufficient  that  the  instrument 
is  signed  by  the  buyer,  whether  in  the  form  of  an 
order  or  of  a  conditional  sale.  In  a  few  states,  how- 
ever, signature  by  the  seller  is  necessary.  For  in- 
stance, in  Florida,  Iowa  and  Pennsylvania,  signature 
and  acknowledgment  by  the  seller  is  required.  Con- 
tracts must  be  signed  by  all  parties  in  Arizona,  Iowa, 
New  Hampshire,  Washington,  and  Wisconsin.  In 
all  other  states  it  would  seem  that  signature  by  the 
buyer  is  sufficient,  especially  where  the  contract  is 
in  the  form  of  an  order  by  the  buyer  accepted  by 
shipment  of  the  goods.  But  where  the  contract  is  in 
bilateral  form,  it  should  be  signed  by  both  parties 
before  recording  to  obviate  any  question  that  it  was 
never  completely  executed. 

Several  states  have  special  requirements  as  to  wit- 
nesses which  should  be  carefully  examined.  The 
provisions  are  so  different  in  the  various  states  that 
it  is  impossible  to  classify  them.  The  safer  way  is  to 
have  the  signatures  of  all  parties  witnessed  by  at 
least  one  disinterested  party.  In  order  to  determine 
the  validity  of  an  agreement  where  this  has  not  been 
done,  resort  must  be  had  to  the  statutes  of  the  indi- 
vidual states. 

AFFIDAVIT  OF  INTEREST  OF  PARTIES 

In  some  States  an  affidavit  in  some  form  of  the 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  21 

actual  indebtedness  secured  must  be  filed  with  the 
purpose  of  preventing  so  far  as  possible  fradulent 
devices  for  hindering  attaching  creditors,  and  the 
statutes  in  each  State  must  be  carefully  studied  and 
followed,  as  each  State  has  its  own  special  forms 
required.  These  States  are  as  follows : — 

Colorado  ohio 

Maryland   (some  counties)  Pennsylvania 

Nebraska  Wyoming 

New  Hampshire 

SPECIAL  RULES 

In  Colorado,  the  contract  in  order  to  be  treated 
as  a  conditional  sale  must  leave  it  optional  with  the 
buyer  whether  he  will  pay.  If  the  buyer  is  bound  to 
pay  it  is  a  sale  and  a  mortgage  back.  In  Illinois  and 
Pennsylvania  conditional  sales  are  not  valid  as 
against  third  parties  even  when  acknowledged  and 
recorded.  As  a  result  in  Illinois,  the  only  method  of 
retaining  a  lien  as  against  third  parties  is  by  a  chattel 
mortgage  properly  acknowledged  and  recorded. 

In  Pennsylvania  a  conditional  sale  contract  is 
enf  orcible  between  the  parties  although  not  recorded 
or  filed.  But  for  protection  against  third  parties  you 
should  have  a  lease  or  bailment  contract  with  an 
option  to  purchase.  Such  a  contract  will  be  enforced 
as  against  a  trustee  in  bankruptcy  or  against  bona 
fide  purchasers  or  attaching  creditors,  and  all  other 
third  persons  except  a  landlord  who  may  have  a  lien. 
If  the  contract  leaves  title  in  the  seller  with  no  spe- 
cific term  of  lease  and  no  agreement  for  return  of 
the  property  it  is  a  conditional  sale  which  is  treated 
as  an  absolute  sale.  But  if  the  contract  provides  a 
definite  term  of  leasing  with  certain  rent  and  for 


22  MODERN  AMERICAN  LAW  LECTURE 

return  of  the  property  at  the  end  of  the  term,  it  is 
a  lease  even  though  on  receipt  of  the  full  rent  the 
lessee  may  elect  to  become  the  owner  without  further 
payment. 

RECORDING 

A  conditional  sale  is  valid  everywhere  as  between 
the  original  parties.  It  is,  however,  the  policy  of 
some  states  as  expressed  in  their  statutes  to  give  no- 
tice of  the  existence  of  a  conditional  sale  in  some  way 
in  order  to  apprise  third  parties  of  the  actual  condi- 
tion of  the  title. 

The  difficulty  is  that  otherwise  a  man  might  be 
doing  business  and  be  apparently  very  prosperous 
with  a  large  stock  of  machinery  and  merchandise 
which  in  reality  he  did  not  own,  while  as  a  result  of 
his  apparent  prosperity  he  might  easily  induce  mer- 
chants to  send  him  goods  on  credit  as  they  would  not 
do  if  they  knew  the  real  situation.  It  is  common  in 
states  where  this  view  is  taken  to  require  that  a  con- 
ditional sale  in  order  to  be  valid  as  against  third 
persons  shall  be  recorded  with  the  city  or  town  clerk 
or  other  recording  official.  This  means  that  the  con- 
tract shall  be  delivered  by  the  parties  to  the  record- 
ing officer  together  with  the  fee  for  recording.  He 
will  then  enter  it  in  an  index  and  copy  it  in  his  books 
of  record  and  return  the  original  to  the  parties. 

In  some  states  however  it  is  only  necessary  that 
the  conditional  sale  be  filed,  which  means  that  the 
original  will  be  placed  on  file  and  indexed  but  not 
copied.  In  either  case  the  prudent  seller  will  not 
deliver  the  goods  until  the  instrument  is  properly 
filed  or  recorded.  The  buyer  of  course  should  pay 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          23 

for  the  recording  or  filing  fee.  The  law  often  re- 
quires in  addition  to  filing  and  recording  that  the 
instrument  be  acknowledged  by  one  or  both  of  the 
parties,  or  witnessed,  and  these  requirements  must 
be  carefully  complied  with. 

Conditional  sales  do  not  need  to  be  recorded,  filed, 
acknowledged  or  witnessed  in  the  following  states: 

Arkansas  Louisiana 
(even  if  to  be  sold  in  the  usual  Mississippi 

course  of  trade)  (may  be  oral) 

California  Nevada 

District  of  Columbia  New  Mexico 

Florida  Pennsylvania 

Idaho  Rhode  Island 

Illinois  Tennessee 

Indiana  Utah 

In  the  above  states  which  have  no  statutes  govern- 
ing conditional  sales  they  are  nevertheless  commonly 
sustained  by  the  courts  in  accordance  with  their 
terms.1 

In  the  following  states  conditional  sales  must  be 
recorded  or  filed  to  keep  title  as  against  third  parties, 
and  need  not  be  acknowledged  or  witnessed: 

Alabama  (over  $200)  North  Carolina 

Arizona  Ohio 

Delaware  Oklahoma 

Kansas  South  Carolina  [See  Perkins  v.  Bank, 

Maine  20  S.  E.  75  (S.  C.)] 

Maryland  South  Dakota 

Minnesota  (at  residence  of  seller)     Texas 

Montana  Washington 

Nebraska  West  Virginia 

New  Hampshire  Wisconsin 

New  Jersey  Wyoming 

New  York 

In  four  states  the  recording  of  conditional  sales  is 

•See,  for  example,  Silverstein  v.  Kohler,  183  P.  451  (Cal.) ;  136  P.  372 
(Idaho).    As  to  effect  in  Illinois  and  Pennsylvania,  see,  ho  were,  p.  21. 


24      .        MODERN  AMERICAN  LAW  LECTURE 

1 
required  only  under  certain  circumstances,  namely: 

Massachusetts  (bill  of  sale  intended  for  security) 

Michigan  (See  Young  v.  Phillips,  202  Mich.  480) 

Oregon  (when  property  becomes  attached  to  real  estate) 

Pennsylvania  (when  property  attached  or  to  be  attached  to  real  estate) 

In  the  following  states  conditional  sales  must  be 
recorded  or  filed  and  must  be  acknowledged  by  the 
vendee  in  person  in  order  to  be  recorded : 

Colorado  graph    supplies   and   jewelry 

(as  to  validity  see  page  21)  pawned  in  certain  cases) 

Connecticut  Georgia 

(except  phonographs  or  phono-  Vermont 

In  the  following  states  conditional  sales  must  be 
recorded  or  filed  and  must  be  either  acknowledged  or 
witnessed : 

Georgia  Missouri 

(signature  by  purchaser  is  suf-  North  Carolina 

fieient)  North  Dakota 

Iowa  Oklahoma 
Kentucky  (filed  and  not  recorded) 

(recording  at  domicil  of  buyer,  Virginia 
155  Ky.  686) 

Time  of  Recording.  In  some  states  a  contract 
must  be  filed  or  recorded  at  once  or  within  a  definite 
period,  and  sometimes  even  before  delivery  of  the 
goods.  These  states  are  as  follows : 

Alabama,  within  thirty  days  of  date. 

Connecticut,  within  a  reasonable  time  after  its  date. 

Plorida,  need  not  be  recorded  or  filed  for  two  years,  but  if  not  paid  at 
the  end  of  that  time  it  should  be  recorded  and  must  be  either  ac- 
knowledged by  the  buyer  or  proven  by  a  subscribing  witness. 

Georgia,  within  thirty  days  from  date. 

Massachusetts,  within  fifteen  days  of  their  date,  unless  the  property 
sold  becomes  a  fixture  when  within  ten  days  of  its  date. 

Mississippi,  within  three  years  from  date. 

New  Hampshire,  within  twenty  days  of  delivery  of  property. 

New  York,  to  be  filed  as  soon  as  possible. 

Ohio,  should  be  filed  or  recorded  forthwith. 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  25 

Oregon,  within  ten  days  after  property  becomes  attached  to  real  estate. 
South  Carolina,  within  ten  days  of  delivery  or  execution. 
Vermont,  within  thirty  days  after  delivery  of  the  property. 
Washington,  within  ten  days  of  delivery  of  property. 

In  most  states,  however,  it  is  enough  that  the  con- 
tract is  filed  or  recorded  at  the  time  of  shipment. 
The  prudent  seller  should  in  all  cases  insist  on  re- 
cording before  he  actually  sends  the  goods. 

PLACE  OF  RECORD 

The  usual  American  rule  is  that  a  conditional  sale 
shall  be  recorded  in  the  place  where  the  buyer  resides 
and  this  view  prevails  in  the  following  states : 

Connecticut  New  Hampshire 

Iowa  New  York 

Maine  North  Carolina 

Minnesota  Ohio 

Missouri  South  Carolina 

Nebraska  Washington 

In  some  states  record  is  required  in  the  place  where 
the  goods  were  at  the  time  of  sale,  as  in 

Arizona  Virginia 

Montana  West  Virginia 

North  Dakota  Wyoming 

Under  the  Uniform  Conditional  Sale  Act  record- 
ing must  be  made  in  the  place  where  the  goods  are 
kept  after  the  sale  and  this  is  also  the  rule  in  Kansas 
and  Oklahoma. 

In  three  states  (Alabama,  Georgia,  Michigan)  two 
records  are  required,  one  where  the  buyer  resides 
and  one  where  the  goods  were  delivered.  Record  may 
be  in  either  place  in  Texas. 

DURATION  OF  VALIDITY 

The  length  of  time  during  which  the  contract  is 


26  MODERN  AMERICAN  LAW  LECTURE 

valid  is  limited  in  some  states  as  follows : 

Arizona,  valid  for  three  years.  Minnesota,  valid  for  six  years. 

California,  valid  for  two  years  if  Mississippi,  valid  for  six  years. 

executed    without    the     state,  Missouri,  valid  for  five  years. 

and  for  four  years  if  executed  Nebraska,  valid  for  five  years. 

within  the  state.  Nevada,  valid  for  six  years. 

Colorado,  valid  for  two  years  if  not  New  Jersey,  valid  for  three  years. 

to    exceed   $2,500;    five   years,  New  Mexico,  valid  for  six  years. 

$2,500  to  $20,000;  ten  years,  if  North    Carolina,    valid    for    three 

exceeds  $20,000.  years. 

Delaware,  valid  for  three  years.  Oregon,  valid  for  six  years. 

District    of    Columbia,    valid    for  Rhode  Island,  valid  for  six  years. 

three  years.  South  Dakota,  valid  for  three  years. 

Georgia,  valid  for  six  years.  Vermont,  valid  for  six  years. 

Idaho,  valid  for  five  years.  Washington,  valid  for  six  years. 

Kansas,  valid  for  two  years.  Wisconsin,  valid  for  three  years. 

Kentucky,  valid  for  fifteen  years.  Wyoming,  valid  for  one  year. 
Michigan,  valid  for  one  year. 

In  some  Western  States  like  California  the  seller 
should  beware  of  short  statutes  of  limitations  which 
may  bar  him  of  any  remedy  at  all  for  the  purchase 
price. 

DISCHARGE 

Some  states  like  Kansas  require  that  a  discharge 
of  the  contract  shall  be  entered  on  the  record  when 
full  payment  is  made,  and  in  such  states  the  seller 
may  be  liable  to  a  penalty  for  a  failure  to  enter  such 
a  discharge.  The  purpose  of  these  statutes  is  to  pre- 
vent a  fraudulent  buyer  from  keeping  an  apparent 
lien  outstanding  on  his  property.  Otherwise  his 
creditors  may  thus  be  prevented  from  attaching  his 
property  through  fear  of  complications  with  the 
seller  over  a  conditional  bill  of  sale  which  has  in 
reality  been  discharged.  In  any  case  it  is  prudent 
for  the  seller  to  send  the  buyer  on  final  payment  a 
discharge  in  proper  form  to  be  recorded.  The  possi- 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          27 

bility  that  the  seller  might  be  charged  with  collud- 
ing in  a  fraudulent  scheme  to  hinder  or  delay  the 
creditors  of  the  buyer  is  thus  obviated. 

RENEWAL  OR  REFILING 

In  some  states  the  law  requires  a  renewal  or  refil- 
ing of  an  instrument  after  a  certain  period  to  keep 
it  alive,  and  these  states  are  at  present : 

Arizona,  refiling  every  year  after  three  years. 

Colorado,  renewal  at  maturity  and  every  two  years  thereafter. 

Delaware,  refiling  annually  after  three  years. 

Kansas,  renewal  after  two  years  and  every  two  years  thereafter. 

Michigan,  renewal  annually. 

Minnesota,  must  be  renewed  within  thirty  days  of  the  end  of  two  years 

from  the  date  when  due  and  in  the  same  way  each  year  thereafter, 

and  this  may  be  done  by  filing  an  affidavit  of  the  mortgage  showing 

the  amount  unpaid. 
Nebraska,  must  be  renewed  by  filing  within  thirty  days  before  the  end 

of  five  years  from  date  of  original  contract,  and  within  thirty  days 

before  end  of  each  year  thereafter,  with  affidavit. 
New  Jersey,  refiling  annually  after  three  years. 
New  York,  contract  must  be  refiled  within  thirty  days  before  end  of 

each  year  whether  or  not  property  is  to  be  attached  to  building. 
North  Dakota,  renewal  within  ninety  days  before  end  of  three  years 

from  first  filing. 
Ohio,  contract  must  be  refiled  within  thirty  days  before  end  of  one  year 

from  date  of  previous  filing. 
Oklahoma,  contract  must  be  renewed  within  thirty  days  before  end  of 

three  years  of  previous  filing. 
South  Dakota,  refiling  annually  after  three  years. 
Wisconsin,  refiling  annually  after  three  years. 
Wyoming,  renewal  annually. 

PROTECTION  AGAINST  CONFUSION  WITH  LANDLORD'S 
LIEN  OR  ATTACHMENT  TO  REAL  ESTATE 

Where  the  contract  of  conditional  sale  is  properly 
executed  and  recorded  or  filed,  the  instrument  is  good 
protection  to  the  seller.  The  only  consideration 
which  the  seller  must  have  in  mind  beyond  this  is 


28  MODERN  AMERICAN  LAW  LECTURE 

to  see  that  the  buyer  does  not  mingle  the  articles 
covered  by  the  conditional  sale  with  other  property. 
This  may  be  done  by  selling  them  or  using  them  in 
the  course  of  trade  in  such  a  way  that  they  must 
necessarily  be  consumed  or  confused  with  other 
property.  This  may  be  very  dangerous,  since  a  con- 
tract for  conditional  sale  of  goods  to  be  sold  again  at 
retail  is  fraudulent  and  against  public  policy  in  some 
states,  and  the  original  seller  is  deprived  of  his  rights 
in  the  goods. 

Furthermore,  the  seller  must  take  care  that  the 
property,  especially  if  heavy  machinery,  does  not  be- 
come a  fixture  so  attached  to  realty  as  to  become  a 
part  of  it.  An  actual  case  will  serve  to  illustrate  this 
danger.  A  contractor  bought  from  a  business  house 
a  crushing  plant  which  he  proceeded  to  set  up  in  the 
usual  way  on  a  quarry  leased  from  a  third  party. 
After  a  time  the  contractor  became  insolvent.  The 
crushing  plant  had  been  sold  on  a  conditional  bill  of 
sale,  but  when  the  seller  attempted  to  get  the  plant, 
which  was  worth  some  $2500,  he  found  that  the  owner 
of  the  quarry  claimed  a  lien  upon  it  for  rent.  The 
owner  contended  that  it  had  become  fixed  to  the 
realty  and  could  not  be  removed. 

After  careful  consideration,  the  seller  decided  that 
this  question  had  better  come  up  with  him  as  the 
defendant  than  in  any  other  way.  In  accordance 
with  legal  advice,  the  seller  sent  his  men  to  the  quarry 
at  four  o'clock  in  the  morning  and  took  off  the  plant 
before  the  land  owner  knew  about  it;  the  land 
owner  never  brought  suit  and  the  seller  saved  his 
crushing  plant.  Where,  however,  the  article  has 
actually  become  embedded  or  fixed  so  that  it  cannot 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  29 

be  removed  without  damage  to  the  real  estate,  the 
land  owner  can  undoubtedly  obtain  an  injunction 
against  the  removal  of  the  machinery.  In  the 
case  of  Allis-Chalmers  Co.  v.  City  of  Atlantic, 
144  1ST.  W.  346  (Iowa),  title  to  certain  machinery  sold 
conditionally  was  lost  because  the  Supreme  Court 
considered  the  property  had  become  a  fixture  to  the 
realty.  In  such  cases  the  landowner  may  obtain 
relief  in  equity  and  there  obtain  an  injunction 
against  the  removal  of  the  property  attached  to  the 
realty,  although  sold  on  a  conditional  contract  of 
sale.1  Some  states  like  Massachusetts,  New  York, 
Oregon  and  Pennsylvania  contain  special  require- 
ments for  recording  where  the  property  becomes  a 
part  of  the  real  estate.2 

A  list  is  here  given  of  the  states  in  which  the  land- 
lord's lien  for  rent  does  not  take  precedence  over  the 
rights  of  the  seller  of  personal  property : 

Alabama  New  Jersey 

Arizona  New  Mexico 

Arkansas  New  York 

California  North  Carolina 

Connecticut  North  Dakota 

District  of  Columbia  Ohio 

Idaho  Oklahoma 

Indiana  Oregon 

Indian  Territory  Khode  Island 

Kansas  South  Carolina 

Maine  South  Dakota 

Massachusetts  Tennessee 

Michigan  Utah 

Minnesota  Vermont 

Missouri  Washington 

Montana  Wisconsin 

Nebraska  Wyoming 
Nevada 

iCamden  v.  Fairbanks,  etc.  Co.,  86  So.  8   (Ala.). 

2See  also  Uniform  Conditional  Sales  Act,  sec.  7,  post  p.  45. 


30  MODERN  AMERICAN  LAW  LECTURE 

This  is  also  true  in  Kentucky  except  where  the 
contract  is  made  while  the  property  is  on  the  prem- 
ises. But  unless  the  contract  of  conditional  sale  has 
been  recorded  before  the  property  has  been  placed 
on  the  premises,  the  landlord's  lien  defeats  the  rights 
of  the  seller  in  the  following  states : 

Florida  Mississippi 

Georgia  Virginia 

Illinois  West  Virginia 
Maryland 

In  Iowa,  the  landlord  has  no  lien  where  the  con- 
tract is  recorded  before  property  is  placed  on  the 
premises.  The  law  on  this  point  is  unsettled  in  Colo- 
rado and  New  Hampshire,  while  in  Maryland,  al- 
though there  is  no  decision  exactly  in  point,  the 
courts  are  inclined  to  favor  the  landlord  and  a  waiver 
should  be  obtained. 

The  landlord's  rights  are  held  superior  to  those  of 
the  seller  in  Delaware,  Louisiana,  and  Pennsylvania. 
This  is  the  rule  in  Texas  unless  the  contract  of  condi- 
tional sale  is  filed  before  delivery. 

EFFECT  AND  PRIORITY  OF  LIEN  FOR  REPAIRS 

Although  there  is  much  conflict  of  authority  it 
seems  to  be  the  better  view  that  the  lien  of  the  con- 
ditional seller  is  superior  to  that  of  an  artisan  who 
subsequently  does  work  on  the  article.1 

But  in  some  jurisdictions  the  view  prevails  that 
where  the  conditional  sale  contemplates  continual  use 
and  repairs  the  lien  of  the  artisan  for  the  repairs 
prevails.2 

'Baughman  Auto  Co.  v.  Emanuel,  137  Ga.  354;  73  S.  E.  511. 
•Watts  v.  Sweeney,  127  Ind.  116,  26  N.  E.  680.  See  comprehensive  note 
in  33  Harvard  Law  Eeview  868. 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          31 
DESTRUCTION  OF  PROPERTY 

The  seller  should  inform  himself  as  to  the  law  of 
the  state  into  which  the  sale  is  made,  for  some 
courts  hold  that  the  destruction  of  the  property  be- 
fore full  payment  relieves  the  buyer  from  further 
liability.  This  is  true  in : 

Alabama  New  York 

Georgia  Washington 

Massachusetts 

In  Louisiana,  in  case  of  partial  destruction  of  the 
property,  the  buyer  may  elect  to  return  the  property 
or  may  keep  it  and  when  paying  for  it  deduct  the 
damages.  In  Pennsylvania,  when  the  property  is 
destroyed  before  payment,  the  buyer  may  recover  a 
portion  of  the  amount  he  has  paid. 

Where  property  is  destroyed  by  fire  or  otherwise 
without  the  fault  of  either  party,  the  buyer  must 
stand  the  loss  and  is  bound  to  make  the  balance  of 
his  payments  according  to  agreement  in  the  following 
states : 

Arkansas  Oklahoma 

Colorado  Tennessee 

Indiana  Vermont 

Mississippi  North  Carolina 

Missouri  Virginia 

New  Jersey  Wisconsin 
New  York 

In  either  group  of  states  the  seller  should  see  to 
it  that  insurance  in  the  name  of  the  seller  is  taken 
out  to  cover  any  loss  on  the  property.  In  all  cases 
the  contract  should  contain  a  clause  for  insurance 
for  the  benefit  of  the  seller  as  far  as  his  interest  may 
appear.  For  there  is  some  question  when  the  insur- 


32  MODERN  AMERICAN  LAW  LECTURE 

ance  is  taken  out  by  the  buyer  in  his  name  whether 
that  does  not  cover  simply  the  interest  of  the  buyer, 
and  it  will  probably  put  the  seller  to  considerable 
expense  to  prove  his  rights  in  any  such  insurance 
money  and  collect  upon  it.  It  will  be  an  additional 
safeguard  if  the  contract  expressly  provides  that  any 
insurance  taken  out  in  the  name  of  the  buyer  shall 
inure  to  the  seller.  But  the  best  way  to  protect  the 
seller  is  to  take  out  a  policy  showing  his  interest  and 
have  it  delivered  to  him  at  the  time  he  delivers  the 
goods. 

WHEN  A  SALE  BY  A  BUYER  IS  A  CRIMINAL  OFFENSE 

In  most  of  the  states  there  are  provisions  making 
the  buyer  criminally  liable  if  he  disposes  of  the  prop- 
erty subject  to  conditional  sale  without  the  consent 
of  the  seller.  Such  statutes  are  necessary,  as  it  is 
the  general  rule  that  the  buyer  after  he  has  paid  a 
portion  of  the  price  has  not  the  legal  title,  but  has 
an  equity  like  the  mortgagor  of  real  estate,  which 
he  can  dispose  of  unless  forbidden  by  statute.  Such 
a  sale  would  not  be  a  crime  at  common  law,  although 
it  might  be  a  breach  of  his  contract  with  the  seller. 
A  statute  of  this  nature  is  an  added  protection  to  the 
seller,  who  can  better  afford  to  take  a  business  risk 
in  a  state  where  such  a  statute  is  in  force  than  in 
another.  If  the  buyer  does  violate  the  statute  the 
seller  will  have  an  additional  hold  on  him,  although 
in  attacking  him  on  this  line  one  should  be  careful 
not  to  render  oneself  open  to  a  charge  of  blackmail. 

In  the  following  states  it  is  made  by  statute  a  crim- 
inal offense  for  the  buyer  under  a  contract  of  condi- 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  33 

tional  sale  to  sell  the  property  covered  by  it  without 
the  consent  of  the  conditional  vendor : 

Alabama  Montana 

Arizona  Nebraska 

Arkansas  Nevada 

California  New  Jersey 

Colorado  New  York 

Delaware  North  Dakota 

District  of  Columbia  Ohio 

Connecticut  Oklahoma 

Florida  Oregon 

Georgia  Pennsylvania 

Indian  Territory  South  Carolina 

Iowa  South  Dakota 

Kansas  Tennessee 

Kentucky  Texas 

Louisiana  Utah 

Maine  Vermont 

Maryland  Virginia 

Massachusetts  Washington 

Michigan  Wisconsin 

Minnesota  Wyoming 
Missouri 

In  the  following  states  there  is  no  statute  making 
it  a  crime  for  the  buyer  under  a  conditional  sale  con- 
tract to  sell  the  property  covered  by  it  without 
permission : 

Idaho  North  Carolina 

Illinois  Rhode  Island 

Indiana  West  Virginia 
New  Mexico 


REMEDIES  OF  SELLER 

A  seller  under  a  conditional  contract  of  sale 
usually  has  five  remedies  in  case  the  buyer  fails  to 
keep  up  the  instalments.  (1)  He  can  take  the  prop- 
erty itself;  (2)  he  may  bring  suit  for  the  money  due ; 
(3)  he  can  bring  an  action  for  possession  of  the 


34  MODERN  AMERICAN  LAW  LECTURE 

property ;  (4)  he  may  demand  the  property  and  then 
sue  for  damages  for  failure  to  deliver  it;  (5)  or  he 
may  bring  an  action  in  equity  to  foreclose  the  lien 
under  the  contract.  The  last  remedy  is  peculiarly 
advantageous  where  the  property  has  become  at- 
tached to  real  estate  and  it  cannot  be  removed  with- 
out injury  to  the  property.  In  such  a  case  the  seller 
cannot  bring  action  for  possession,  but  if  he  brings 
a  bill  in  equity  for  foreclosure  all  parties  in  interest 
can  be  summoned  in  and  the  rights  of  all  parties 
settled. 

Where  there  is  no  provision  of  law  on  the  subject, 
the  seller  will  have  the  right  to  go  and  take  the  prop- 
erty without  formality,  using  any  means  necessary 
to  do  so  short  of  actual  breach  of  the  peace.  If  the 
buyer  forcibly  resists  his  attempt  to  take  the  prop- 
erty, the  seller  must  then  get  possession  by  legal 
means,  as  by  writ  of  replevin  or  foreclosure.  Before 
commencing  proceedings  to  enforce  a  conditional 
sale  you  should  first  make  sure  that  proper  demand 
has  been  made,  as  in  many  cases  the  law  requires  de- 
mand before  a  forfeiture  can  be  declared. 

In  some  states  additional  protection  is  furnished 
the  buyer  by  statutes  providing  that  when  the,  seller 
takes  the  property  for  failure  of  the  buyer  to  make 
the  payments  he  must  give  certain  notice  and  offer 
the  property  at  public  sale  after  opportunity  to  the 
buyer  to  redeem  his  contract.  It  will  be  generally 
held  as  it  has  been  in  New  York  that  a  provision  in 
the  contract  by  which  the  buyer  purports  in  advance 
to  waive  his  right  to  have  this  procedure  used  is 
against  public  policy  and  void.  The  buyer  cannot  in 
advance  waive  his  statutory  right  of  redemption  or 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          35 
his  right  to  have  the  property  sold  at  public  auction. 
IN  CASE  OF  BANKRUPTCY 

Where  a  conditional  contract  of  sale  is  properly 
drawn  the  seller  is  not  a  secured  creditor  of  the 
buyer  within  the  language  of  the  bankruptcy  act, 
and  should  not  file  a  claim  as  such,  although  he  can 
do  so  if  he  desires.  The  trustee  in  bankruptcy  is 
vested  with  all  the  rights  of  a  creditor  holding  a  lien, 
and  therefore  the  trustee  has  a  right  to  attack  any 
conditional  sale  on  the  ground  that  it  is  not  properly 
recorded  or  filed.  Probably  the  best  method  of  pro- 
cedure is  for  the  seller  to  file  a  petition  to  the  referee 
setting  out  the  facts  and  asking  for  payment  in  full 
or  for  a  return  of  the  property.  The  court  will  there- 
upon act  on  this  petition  and  will  undoubtedly  sus- 
tain the1  rights  of  the  seller  if  the  contract  of  sale  is 
properly  drawn. 

ELECTION  OF  REMEDIES 

Before  bringing  proceedings  under  a  conditional 
sale  the  seller  should  consider  very  carefully  just 
what  his  remedy  will  be.  It  is  the  law  in  most  states, 
and  it  is  likely  to  be  so  held  in  any  state  where  it  has 
not  yet  been  decided,  that  suing  for  the  debt  and 
taking  possession  of  the  property  under  a  conditional 
contract  of  sale  are  inconsistent  remedies.  If  the 
seller  pursues  one  he  is  deemed  to  have  waived  the 
other.  It  may  well  be  that  bringing  suit  for  the  debt 
will  be  such  an  election  to  pursue  that  remedy  that 
it  will  confirm  title  in  the  buyer.  This  will  enable 
him  to  make  a  valid  sale  or  mortgage  of  the  property 


36  MODERN  AMERICAN  LAW  LECTURE 

to  a  third  person  which  will  be  superior  then  to  the 
seller's  lien.  An  attaching  creditor  may  in  the  same 
way  obtain  a  superior  lien. 

In  all  such  states  where  you  must  elect,  the  ques- 
tion will  be  a  practical  one  as  to  whether  the  property 
covered  by  the  conditional  sale  in  its  present  condi- 
tion is  worth  more  than  other  property  of  the  debtor 
which  you  might  hope  to  attach  or  levy  upon  in  a 
suit  for  the  purchase  price.  In  considering  this  ques- 
tion, the  seller  should  not  of  course  forget  that  bank- 
ruptcy proceedings  brought  by  or  against  the  debtor 
within  four  months  of  his  attachment  will  nullify 
it,  while  his  lien  under  the  conditional  sale  cannot 
be  affected  by  bankruptcy.  The  seller's  decision  will 
thus  depend  on  what  he  can  ascertain  as  to  the  prop- 
erty and  prospects  of  the  debtor.  If  the  debtor  is 
likely  to  go  into  bankruptcy,  attempt  should  be  made 
to  enforce  the  lien  given  under  the  contract  of  condi- 
tional sale  and  the  vendor's  attorney  should  not  bring 
suit  for  the  purchase  price. 

There  may  be  cases,  however,  where  a  threat  to 
take  the  property  will  be  sufficient  to  obtain  a  settle- 
ment. There  may  be  other  cases  where  the  com- 
mencement of  suit  for  the  purchase  price  will  achieve 
the  same  happy  result  without  the  expense  and 
trouble  of  actually  taking  the  property.  All  the 
information  available  should  first  be  obtained  and 
a  decision  arrived  at  in  accordance  with  the  prospects 
of  the  individual  case.  In  many  cases  as  a  matter 
of  business  policy  it  is  inexpedient  to  push  customers 
too  hard  for  the  purchase  price  of  goods  sold. 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          37 

The  seller  must  elect  between  taking  the  property 
and  bringing  suit  for  the  debt  due,  in  the  following 
states : 

Arkansas  Minnesota 

California  Missouri 

Connecticut  Nebraska 

Delaware  New  York 

District  of  Columbia  Ohio 

Florida  Oregon 

Indiana  Pennsylvania 

Iowa  South  Carolina 

Kansas  Texas 

Maryland  Vermont 

Massachusetts  Washington 

Michigan  Wisconsin 

The  rule  seems  to  be  that  the  seller  may  obtain 
judgment  for  the  purchase  price  and  if  the  judgment 
proves  worthless  he  may  still  retake  the  property  in 
the  following  states : 

Georgia  New  York 

Michigan  North  Carolina 

Mississippi  South  Dakota 
New  Jersey 

In  Alabama,  a  seller  can  probably  sue  for  the  pur- 
chase price  and  thereafter  replevy  the  property  it 
there  is  no  intervening  lien.  No  election  seems  to 
be  necessary  in  Connecticut  and  Maine.  This  is  true 
in  Pennsylvania,  when  no  judgment  has  been  ob- 
tained. It  has  been  held  in  Massachusetts  and  New 
York  that  a  suit  on  certain  instalment  notes  when 
due  does  not  waive  the  buyer's  right  to  take  the  prop- 
erty to  enforce  payment  of  other  notes. 

EFFECT  OF  EXTENSION 

The  seller  must  beware  how  he  grants  the  buyer 
an  extension  of  time  for  payment  as  if  he  does  this 


38  MODERN  AMERICAN  LAW  LECTURE 

he  cannot  claim  a  forfeiture  during  the  time  of  ex- 
tension though  there  was  no  consideration  for  the 
extension.1 

LACHES 

The  seller  should  always  act  promptly  to  protect 
his  rights  especially  against  innocent  third  parties 
as  he  may  lose  his  claim  by  delay  and  be  estopped  to 
assert  his  rights.2 

ILLEGALITY 

The  matter  of  illegality  affects  the  right  of  a  ven- 
dor to  a  conditional  sale  in  a  peculiar  way.  In  the 
ordinary  contract  of  sale,  mere  knowledge  on  the 
part  of  the  seller  that  the  article  sold  is  to  be  used 
for  an  illegal  purpose  is  not  sufficient  to  prevent  re- 
covery of  the  price.  The  vendor  will  not  lose  his 
rights  unless  in  some  way  he  assists  the  vendee  in  the 
illegal  purpose  although  in  Maine  and  Massachusetts, 
the  contrary  has  been  held  with  reference  to  the  sale 
of  intoxicating  liquors  in  violation  of  statute.3 

The  distinction  is  also  made  that  where  the  sale 
is  of  goods  to  be  used  by  the  vendee  in  aid  of  the 
perpetration  of  a  heinous  crime,  such  as  treason,  the 
contract  will  be  considered  invalid.  But  since  ordi- 
narily the  agreement  of  sale  is  held  valid,  the  vendor 
may  have  such  remedies  as  he  would  usually  be 
allowed  with  any  contract  of  sale. 

'Keinkey  v.  Findley  Electric  Co.,  180  N.  W.  236  (Minn.). 
'Barter  v.  Delno,  194  P.  300  (Cal.  App.). 

8The  authorities  are  reviewed  in  the  case  of  Graves  v.  Johnson,  156 
Mass.  211,  30  N.  E.  818,  15  L.  E.  A.  834. 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          39 

Under  the  contract  of  conditional  sale,  the  law  is 
different.  Where  the  vendor  reserves  the  right  to 
retake  the  property  whenever  he  deems  it  is  insecure 
even  before  the  deferred  payments  have  matured  (as 
is  usually  done)  the  control  of  the  use  of  the  property 
is  left  in  his  hands,  hence  the  law  considers  that 
the  vendor  has  joined  in  the  vendee's  illegal  purpose. 
Otherwise  he  would  have  exercised  his  privilege  of 
control  over  the  property  to  prevent  its  use  contrary 
to  public  policy.  On  this  theory,  the  vendor  in  a  bill 
of  conditional  sale  loses  title  to  the  goods  against  an 
execution  creditor  of  the  vendee.1 

FORFEITURE  OF  PROPERTY  USED  IN  ILLEGAL 
LIQUOR  BUSINESS 

A  new  danger  to  the  seller  under  a  conditional  sale 
has  arisen  with  the  advent  and  general  enforcement 
of  prohibition,  as  he  must  now  at  his  peril  see  that 
the  article  sold  is  not  used  in  violation  of  the  prohi- 
bition laws.  The  power  of  the  prohibition  enforce- 
ment officers  to  condemn  and  sell  at  public  sale  any 
property  used  in  such  illegal  practices  means  that 
such  sale  will  probably  be  made  without  regard  to 
the  rights  of  the  real  owner  of  the  property.  Espe- 
cial danger  is  run  by  the  conditional  vendor  of  trucks 
or  automobiles  as  if  they  are  found  used  for  trans- 
porting liquor  they  may  be  confiscated.  At  this  writ- 
ing the  law  on  this  subject  can  hardly  be  said  to  be 
crystallized  but  there  is  already  ample  authority  for 
cutting  off  the  rights  of  the  conditional  vendor,  as 
appears  by  the  following  cases : 

'This  result  was  reached  in  the  case  of  Standard  Furniture  Co.  v. 
Van  Alstine,  22  Wash.  670,  62  Pac.  145,  51  L.  E.  A.  889,  and  Abbott 
Furniture  Co.  v.  Mobley,  141  Ga.  456,  81  S.  E.  196. 


40  MODERN  AMERICAN  LAW  LECTURE 

Commercial  Investment  Trust  v.  U.  S.,  261  Fed.  330. 

Logan  v.  U.  S.,  260  Fed.  746. 

Landers  v.  Commonwealth,  101  S.  E.  778  (Va.). 

United  States  v.  Seven  Passenger  Paige  Car,  259  Fed.  641. 

United  States  v.  Mineey,  254  Fed.  287,  5  A.  L.  E.  211. 

The  vendor  may  take  what  comfort  he  can  out  of 
the  following  cases : 

Shrouder  v.  Sweat,  148  Ga.  378. 

Hatcher  Co.  v.  Foster,  101  S.  E.  299  (Ga.  App.). 

One  Hudson  v.  State,  187  P.  806  (Okla.). 

United  States  v.  One  Ford  Automobile,  259  Fed.  894,  262  Fed.  374. 

State  v.  Davis,  184  P.  161  (Utah). 

All  we  can  safely  say  at  present  is  that  the  con- 
ditional vendor  runs  a  grave  risk  if  the  property  is 
captured  while  used  in  violation  of  the  prohibition 
laws.  The  subject  is  discussed  in  an  excellent  note 
in  the  Harvard  Law  Review  for  December,  1920. 

REMEDIES   OF   BUYER 

Where  the  seller  wrongfully  takes  possession  of 
the  goods  sold  under  conditional  sale,  the  buyer,  hav- 
ing no  complete  title,  cannot  maintain  trover  for 
conversion  of  the  goods,1  but  he  may  treat  the  con- 
tract as  rescinded  and  sue  for  the  return  of  the  money 
he  has  paid  on  account  of  it.2 

THE  UNIFORM  CONDITIONAL  SALES  ACT 

A  draft  of  a  Uniform  Conditional  Sales  Act  was 
completed  in  1918  by  the  Commissioners  on  Uniform 
State  Laws  and  has  already  been  adopted  in  the  fol- 
lowing states : 

'MacArthur  Bros.  Mercantile  Co.  v.  Hagihara,  194  P.  336  (Ariz.). 
*Daskalopolis  v.  Mulvanity,  111  A.  832  (N.  H.). 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          41 

Arizona 

Delaware 

New  Jersey  (amended  by  St.  1920,  sec.  68). 

South  Dakota 

Wisconsin 

West  Virginia 

It  has  also  been  adopted  in  Alaska. 

In  these  jurisdictions,  therefore,  the  rules  laid 
down  in  the  foregoing  discussion  should  be  read  in 
connection  with  this  statute. 

The  full  text  of  the  Uniform  Law  will  be  found  in 
the  Appendix,  and  it  should  be  carefully  studied  as 
it  represents  a  careful  and  intelligent  attempt  not 
only  to  avoid  the  inconsistencies  of  varying  state  laws 
but  to  place  the  rights  of  both  parties  to  a  conditional 
sale  on  a  clear  and  fair  basis. 


2  MODERN  AMERICAN  LAW  LECTURE 

APPENDIX 

UNIFORM  CONDITIONAL  SALES  ACT 
CONTENTS 

SEC.     1.  Definition  of  Terms. 

SEC.    2.  Primary  Rights  of  Buyer. 

SEC.    3.  Primary  Rights  of  Seller. 

SEC.    4.  Conditional  Sales  Valid  Except  as  Otherwise  Pro- 
vided. 

SEC.     5.  Conditional  Sales  Void  as  to  Certain  Persons. 

SEC.     6.  Place  of  Filing. 

SEC.    7.  Fixtures. 

SEC.     8.  Railroad  Equipment  or  Rolling  Stock. 

SEC.     9.  Conditional  Sale  of  Goods  for  Resale. 

SEC.  10.  Filing. 

SEC.  11.  Refiling. 

SEC.  12.  Cancellation  of  Contract. 

SEC.  13.  Prohibition  of  Removal  or  Sale  Without  Notice. 

SEC.  14.  Refiling  or  Removal. 

SEC.  15.  Fraudulent  Injury,  Concealment,  Removal  or  Sale. 

SEC.  16.  Retaking  Possession. 

SEC.  17.  Notice  of  Intention  to  Retake. 

SEC.  18.  Redemption. 

SEC.  19.  Compulsory  Resale  by  Seller. 

SEC.  20.  Resale  at  Option  of  Parties. 

SEC.  21.  Proceeds  of  Resale. 

SEC.  22.  Deficiency  on  Resale. 

SEC.  23.  Rights  of  Parties  When  There  Is  No  Resale. 

SEC.  24.  Election  of  Remedies. 

SEC.  25.  Recovery  of  Part  Payments. 

SEC.  26.  Waiver  of  Statutory  Protection. 

SEC.  27.  Loss  and  Increase. 

SEC.  28.  Act  Prospective  Only. 

SEC.  29.  Rules  for  Cases  Not  Provided  for. 

SEC.  30.  Uniformity  of  Interpretation. 

SEC.  31.  Short  Title. 

SEC.  32.  Inconsistent  Laws  Repealed. 

SEC.  33.  Time  of  Taking  Effect. 


43 

AN  ACT  CONCERNING  CONDITIONAL  SALES  AND  TO 
MAKE  UNIFORM  THE  LAW  RELATING  THERETO 

SECTION  1.  [Definition  of  Terms.]  In  this  Act 
" Conditional  sale"  means  (1)  any  contract  for  the 
sale  of  goods  under  which  possession  is  delivered  to 
the  buyer  and  the  property  in  the  goods  is  to  vest  in 
the  buyer  at  a  subsequent  time  upon  the  payment  of 
part  or  all  of  the  price,  or  upon  the  performance  of 
any  other  condition  or  the  happening  of  any  con- 
tingency; or  (2)  any  contract  for  the  bailment  or 
leasing  of  goods  by  which  the  bailee  or  lessee  con- 
tracts to  pay  as  compensation  a  sum  substantially 
equivalent  to  the  value  of  the  goods,  and  by  which  it 
is  agreed  that  the  bailee  or  lessee  is  bound  to  become, 
or  has  the  option  of  becoming  the  owner  of  such 
goods  upon  full  compliance  with  the  terms  of  the 
contract. 

" Buyer"  means  the  person  who  buys  or  hires  the 
goods  covered  by  the  conditional  sale,  or  any  legal 
successor  in  interest  of  such  person. 

" Filing  district"  means  the  sub-division  of  the 
state  in  which  conditional  sale  contracts,  or  copies 
thereof,  are  required  by  this  act  to  be  filed. 

" Goods"  means  all  chattels  personal  other  than 
things  in  action  and  money,  and  includes  emblements, 
industrial  growing  crops,  and  things  attached  to  or 
forming  a  part  of  land  which  are  agreed  to  be  severed 
before  sale  or  under  the  conditional  sale. 

"Performance  of  the  condition"  means  the  occur- 
rence of  the  event  upon  which  the  property  in  the 
goods  is  to  vest  in  the  buyer,  whether  such  event  is 
the  performance  of  an  act  by  the  buyer  or  the  hap- 
pening of  a  contingency. 


44  MODERN  AMERICAN  LAW  LECTURE 

"Person"  includes  an  individual,  partnership,  cor- 
poration, and  any  other  association. 

"Purchase"  includes  mortgage  and  pledge. 

"Purchaser"  includes  mortgagee  and  pledgee. 

"Seller"  means  the  person  who  sells  or  leases  the 
goods  covered  by  the  conditional  sale,  or  any  legal 
successor  in  interest  of  such  person. 

SECTION  2.  [Primary  Eights  of  Buyer.]  The 
buyer  shall  have  the  right  when  not  in  default  to 
retain  possession  of  the  goods,  and  he  shall  also  have 
the  right  to  acquire  the  property  in  the  goods  on  the 
performance  of  the  conditions  of  the  contract.  The 
seller  shall  be  liable  to  the  buyer  for  the  breach  of 
all  promises  and  warranties,  express  or  implied, 
made  in  the  conditional  sale  contract,  whether  or  not 
the  property  in  the  goods  has  passed  to  the  buyer. 

SECTION  3.  [Primary  Rights  of  Seller.]  The 
buyer  shall  be  liable  to  the  seller  for  the  purchase 
price,  or  for  instalments  thereof,  as  the  same  shall 
become  due,  and  for  breach  of  all  promises  made  by 
him  in  the  conditional  sale  contract,  whether  or  not 
the  property  in  the  goods  has  passed  to  the  buyer. 

SECTION  4.  [Conditional  Sales  Valid  Except  as 
Otherwise  Provided.]  Every  provision  in  a  condi- 
tional sale  reserving  property  in  the  seller  after 
possession  of  the  goods  is  delivered  to  the  buyer,  shall 
be  valid  as  to  all  persons,  except  as  hereinafter  other- 
wise provided. 

SECTION  5.  [Conditional  Sales  Void  as  to  Certain 
Persons.]  Every  provision  in  a  conditional  sale  re- 
serving property  in  the  seller  shall  be  void  as  to  any 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  45 

purchaser  from  or  creditor  of  the  buyer,  who,  with- 
out notice  of  such  provision,,  purchases  the  goods  or 
acquires  by  attachment  or  levy  a  lien  upon  them, 
before  the  contract  or  a  copy  thereof  shall  be  filed  as 
hereinafter  provided,  unless  such  contract  or  copy 
is  so  filed  within  ten  days  after  the  making  of  the 
conditional  sale. 

SECTION  6.  [Place  of  Piling.]  The  conditional 
sale  contract  or  copy  shall  be  filed  in  the  office 

in  [the  city]  [county]  [regis- 
tration district]  in  which  the  goods  are  first  kept  for 
use  by  the  buyer  after  the  sale.  It  shall  not  be  nec- 
essary to  the  validity  of  such  conditional  sale  con- 
tract, or  in  order  to  entitle  it  to  be  filed,  that  it  be 
acknowledged  or  attested.  This  section  shall  not 
apply  to  the  contracts  described  in  Section  8. 

SECTION  7.  [Fixtures.]  If  the  goods  are  so  affixed 
to  realty,  at  the  time  of  a  conditional  sale  or  subse- 
quently as  to  become  a  part  thereof  and  not  to  be 
severable  wholly  or  in  any  portion  without  material 
injury  to  the  freehold,  the  reservation  of  property 
as  to  any  portion  not  so  severable  shall  be  void  after 
the  goods  are  so  affixed,  as  against  any  person  who 
has  not  expressly  assented  to  the  reservation.  If  the 
goods  are  so'  affixed  to  realty  at  the  time  of  a  condi- 
tional sale  or  subsequently  as  to  become  part  thereof 
but  to  be  severable  without  material  injury  to  the 
freehold,  the  reservation  of  property  shall  be  void 
after  the  goods  are  so  affixed  as  against  subsequent 
purchasers  of  the  realty  for  value  and  without  notice 
of  the  conditional  seller's  title,  unless  the. conditional 
sale  contract,  or  a  copy  thereof,  together  with  a 


46  MODERN  AMERICAN  LAW  LECTURE 

statement  signed  by  the  seller  briefly  describing  the 
realty  and  stating  that  the  goods  are  or  are  to  be 
affixed  thereto,  shall  be  filed  before  such  purchase  in 
the  office  where  a  deed  of  the  realty  would  be  recorded 
or  registered  to  affect  such  realty.  As  against  the 
owner  of  realty  the  reservation  of  the  property  in 
goods  by  a  conditional  seller  shall  be  void  when  such 
goods  are  to  be  so  affixed  to  the  realty  as  to  become 
part  thereof  but  to  be  severable  without  material 
injury  to  the  freehold,  unless  the  conditional  sale 
contract,  or  a  copy  thereof,  together  with  a  statement 
signed  by  the  seller  briefly  describing  the  realty  and 
stating  that  the  goods  are  to  be  affixed  thereto,  shall 
be  filed  before  they  are  affixed,  in  the  office  where  a 
deed  would  be  recorded  or  registered  to  affect  such 
realty. 

SECTION  8.  [Railroad  Equipment  or  Rolling 
Stock.]  No  conditional  sale  of  railroad,  or  street  or 
interurban  railway  equipment  or  rolling  stock  shall 
be  valid  as  against  the  purchasers  and  creditors  de- 
scribed in  Section  5,  unless  the  contract  shall  be 
acknowledged  by  the  buyer  or  attested  in  like  man- 
ner as  a  deed  of  real  property,  and  the  contract,  or  a 
copy  thereof,  shall  be  filed  or  recorded  in  the  office  of 
;  and  unless  when  any  engine  or  car  so 
sold  is  delivered  there  shall  then  be  plainly  and  con- 
spicuously marked  upon  each  side  thereof  the  name 
of  the  seller,  followed  by  the  word  "owner." 

SECTION  9.  [Conditional  Sale  of  Goods  for  Re- 
sale.] When  goods  are  delivered  under  a  conditional 
sale  contract  and  the  seller  expressly  or  impliedly 
consents  that  the  buyer  may  resell  them  prior  to  per- 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          47 

formance  of  the  condition,  the  reservation  of  prop- 
erty shall  be  void  against  purchasers  from  the  buyer 
for  value  in  the  ordinary  course  of  business,  and  as 
to  them  the  buyer  shall  be  deemed  the  owner  of  the 
goods,  even  though  the  contract  or  a  copy  thereof 
shall  be  filed  according  to  provisions  of  this  act. 

SECTION  10.  [Filing.]  The  filing  officer  shall 
mark  upon  the  contract  or  copy  filed  with  him  the  day 
and  hour  of  filing  and  shall  file  the  contract  or  copy 
in  his  office  for  public  inspection.  He  shall  keep  a 
separate  book  in  which  he  shall  enter  the  names  of 
the  seller  and  buyer,  the  date  of  the  contract,  the  day 
and  hour  of  filing,  a  brief  description  of  goods,  the 
price  named  in  the  contract  and  the  date  of  cancella- 
tion thereof;  except  that  in  entering  the  contracts 
mentioned  in  Section  8  the 

shall  record  either  the  sum  remaining  to  be  paid  upon 
the  contract  or  the  price  of  the  goods.  Such  book 
shall  be  indexed  under  the  names  of  both  seller  and 
buyer.  For  filing  and  entering  such  contract  or  copy 
the  filing  officer  shall  be  entitled  to  a  fee  of  [ten 
cents] ,  except  that  for  filing  and  entering  a  contract 
described  in  Section  8  the 
shall  be  entitled  to  a  fee  of  [one  dollar] . 

SECTION  11.  [Kefiling.]  The  filing  of  condi- 
tional sale  contracts  provided  for  in  Sections  5,  6  and 
7  shall  be  valid  for  a  period  of  three  years  only.  The 
filing  of  the  contract  provided  for  by  Section  8  shall 
be  valid  for  a  period  of  fifteen  years  only.  The 
validity  of  the  filing  may  in  each  case  be  extended  for 
successive  additional  periods  of  one  year  from  the 
date  of  refiling  by  filing  in  the  proper  filing  district 


48  MODERN  AMERICAN  LAW  LECTURE 

a  copy  of  the  original  contract  within  thirty  days 
next  preceding  the  expiration  of  each  period,  with  a 
statement  attached  signed  by  the  seller,  showing  that 
the  contract  is  in  force  and  the  amount  remaining 
to  be  paid  thereon.  Such  copy,  with  statement  at- 
tached, shall  be  filed  and  entered  in  the  same  man- 
ner as  a  contract  or  copy  filed  and  entered  for  the 
first  time,  and  the  filing  officer  shall  be  entitled  to  a 
like  fee  as  upon  the  original  filing. 

SECTION  12.  [Cancellation  of  Contract.]  After 
the  performance  of  the  condition,  upon  written  de- 
mand delivered  personally  or  by  registered  mail  by 
the  buyer  or  any  other  person  having  an  interest  in 
the  goods,  the  seller  shall  execute,  acknowledge  and 
deliver  to  the  demandant  a  statement  that  the  con- 
dition in  the  contract  has  been  performed.  If  for 
ten  days  after  such  demand  the  seller  fails  to  mail 
or  deliver  such  a  statement  of  satisfaction,  he  shall 
forfeit  to  the  demandant  five  dollars  [$5.00]  and  be 
liable  for  all  damages  suffered.  Upon  presentation 
of  such  statement  of  satisfaction  the  filing  officer 
shall  file  the  same  and  note  the  cancellation  of  the 
contract  and  the  date  thereof  on  the  margin  of  the 
page  where  the  contract  has  been  entered.  For  filing 
and  entering  the  statement  of  satisfaction  the  filing 
officer  shall  be  entitled  to  a  fee  of  [ten  cents] ,  except 
that  the  shall  be  entitled  to  a  fee 

of  [fifty  cents]  for  filing  and  entering  a  statement 
of  the  satisfaction  of  a  contract  described  in  Sec- 
tion 8. 

SECTION  13.  [Prohibition  of  Removal  or  Sale 
Without  Notice.]  Unless  the  contract  otherwise 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  49 

provides,  the  buyer  may,  without  the  consent  of  the 
seller,  remove  the  goods  from  any  filing  district  and 
sell,  mortgage  or  otherwise  dispose  of  his  interest  in 
them ;  but  prior  to  the  performance  of  the  condition, 
no  such  buyer  shall  remove  the  goods  from  a  filing 
district  in  which  the  contract  or  a  copy  thereof  is 
filed,  except  for  temporary  uses  for  a  period  of  not 
more  than  thirty  days,  unless  the  buyer  not  less  than 
ten  days  before  such  removal  shall  give  the  seller 
personally  or  by  registered  mail  written  notice  of 
the  place  to  which  the  goods  are  to  be  removed  and 
the  approximate  time  of  such  intended  removal ;  nor 
prior  to  the  performance  of  the  condition  shall  the 
buyer  sell,  mortgage  or  otherwise  dispose  of  his  in- 
terest in  the  goods,  unless  he,  or  the  person  to  whom 
he  is  about  to  sell,  mortgage  or  otherwise  dispose  of 
the  same,  shall  notify  the  seller  in  writing  personally 
or  by  registered  mail  of  the  name  and  address  of  the 
person  to  whom  his  interest  in  the  goods  is  about  to 
be  sold,  mortgaged  or  otherwise  transferred,  not  less 
than  ten  days  before  such  sale,  mortgage  or  other 
disposal.  If  any  buyer  does  so  remove  the  goods,  or 
does  so  sell,  mortgage  or  otherwise  dispose  of  his 
interest  in  them  without  such  notice  or  in  violation 
of  the  contract,  the  seller  may  retake  possession  of 
the  goods  and  deal  with  them  as  in  case  of  default  in 
payment  of  part  or  all  of  the  purchase  price.  The 
provisions  of  this  section  regarding  the  removal  of 
goods  shall  not  apply,  however,  to  the  goods  described 
in  Section  8. 

SECTION  14.  [Refiling  on  Removal.]  When, 
prior  to  the  performance  of  the  condition,  the  goods 
are  removed  by  the  buyer  from  a  filing  district  in 


50  MODERN  AMERICAN  LAW  LECTURE 

this  state  to  another  filing  district  in  this  state  in 
which  such  contract  or  a  copy  thereof  is  not  filed,  or 
are  removed  from  another  state  into  a  filing  district 
in  this  state  where  such  contract  or  copy  is  not  filed, 
the  reservation  of  the  property  in  the  seller  shall  be 
void  as  to  the  purchasers  and  creditors  described  in 
Section  5,  unless  the  conditional  sale  contract  or  a 
copy  thereof  shall  be  filed  in  the  filing  district  to 
which  the  goods  are  removed,  within  ten  days  after 
the  seller  has  received  notice  of  the  filing  district  to 
which  the  goods  have  been  removed.  The  provisions 
of  this  section  shall  not  apply,  however,  to  the  goods 
described  in  Section  8.  The  provisions  of  Section 
11  regarding  the  duration  of  the  validity  of  the  filing 
and  the  necessity  for  refiling  shall  apply  to  contracts 
or  copies  which  are  filed  in  a  filing  district  other  than 
that  where  the  goods  are  originally  kept  for  use  by 
the  buyer  after  the  sale. 

SECTION  15.  [Fraudulent  Injury,  Concealment, 
Removal  or  Sale.]  When,  prior  to  the  performance 
of  the  condition,  the  buyer  maliciously  or  with  in- 
tent to  defraud,  shall  injure,  destroy  or  conceal  the 
goods,  or  remove  them  to  a  filing  district  where  the 
contract  or  a  copy  thereof  is  not  filed,  without  having 
given  the  notice  required  by  Section  13,  or  shall  sell, 
mortgage,  or  otherwise  dispose  of  such  goods  under 
claim  of  full  ownership,  he  shall  be  guilty  of  a  crime 
and  upon  conviction  thereof  shall  be  imprisoned  [in 
the  county  jail]  for  not  more  than  [one  year]  or  be 
fined  not  more  than  [$500]  or  both. 

SECTION  16.  [Retaking  Possession.]  When  the 
buyer  shall  be  in  default  in  the  payment  of  any  sum 


HOW  TO  DRAFT  A  CONDITIONAL  SALE          51 

due  under  the  contract,  or  in  the  performance  of  any 
other  condition  which  the  contract  requires  him  to 
perform  in  order  to  obtain  the  property  in  the  goods, 
or  in  the  performance  of  any  promise  the  breach  of 
which  is  by  the  contract  expressly  made  a  ground 
for  the  retaking  of  the  goods,  the  seller  may  retake 
possession  thereof.  Unless  the  goods  can  be  retaken 
without  breach  of  the  peace,  they  shall  be  retaken 
by  legal  process,  but  nothing  herein  shall  be  con- 
strued to  authorize  a  violation  of  the  criminal  law. 

SECTION  17.  [Notice  of  Intention  to  Retake.]  Not 
more  than  forty  nor  less  than  twenty  days  prior  to 
the  retaking,  the  seller,  if  he  so  desires,  may  serve 
upon  the  buyer  personally  or  by  registered  mail  a 
notice  of  intention  to  retake  the  goods  on  account 
of  the  buyer 's  default.  The  notice  shall  state  the 
default  and  the  period  at  the  end  of  which  the  goods 
will  be  retaken,  and  shall  briefly  and  clearly  state 
what  the  buyer's  rights  under  this  act  will  be  in  case 
they  are  retaken.  If  the  notice  is  so  served  and  the 
buyer  does  not  perform  the  obligations  in  which  he 
has  made  default  before  the  day  set  for  retaking,  the 
seller  may  retake  the  goods  and  hold  them  subject 
to  the  provisions  of  Sections  19,  20,  21,  22  and  23 
regarding  resale,  but  without  any  right  of  redemp- 
tion. 

SECTION  18.  [Redemption.]  If  the  seller  does  not 
give  the  notice  of  intention  to  retake  described  in 
Section  17,  he  shall  retain  the  goods  for  ten  days  after 
the  retaking  within  the  state  in  which  they  were 
located  when  retaken,  during  which  period  the  buyer, 
upon  payment  or  tender  of  the  amount  due  under 


52  MODERN  AMERICAN  LAW  LECTURE 

the  contract  at  the  time  of  retaking  and  interest,  or 
upon  performance  or  tender  of  performance  of  such 
other  condition  as  may  be  named  in  the  contract  as 
precedent  to  the  passage  of  the  property  in  the  goods, 
or  upon  performance  or  tender  of  performance  of 
any  other  promise  for  the  breach  of  which  the  goods 
were  retaken,  and  upon  payment  of  the  expenses  of 
retaking,  keeping  and  storage,  may  redeem  the  goods 
and  become  entitled  to  take  possession  of  them  and 
to  continue  in  the  performance  of  the  contract  as  if 
no  default  had  occurred.  Upon  written  demand  de- 
livered personally  or  by  registered  mail  by  the  buyer, 
the  seller  shall  furnish  to  the  buyer  a  written  state- 
ment of  the  sum  due  under  the  contract  and  the 
expense  of  retaking,  keeping  and  storage.  For  fail- 
ure to  furnish  such  statement  within  a  reasonable 
time  after  demand,  the  seller  shall  forfeit  to  the 
buyer  [$10]  and  also  be  liable  to  him  for  all  damages 
suffered  because  of  such  failure.  If  the  goods  are 
perishable  so  that  retention  for  ten  days  as  herein 
prescribed  would  result  in  their  destruction  or  sub- 
stantial injury,  the  provisions  of  this  section  shall 
not  apply,  and  the  seller  may  resell  the  goods  immedi- 
ately upon  their  retaking.  The  provision  of  this 
section  requiring  the  retention  of  the  goods  within 
the  state  during  the  period  allowed  for  redemption 
shall  not  apply  to  the  goods  described  in  Section  8. 

SECTION  19.  [Compulsory  Resale  by  Seller.]  If 
the  buyer  does  not  redeem  the  goods  within  ten  days 
after  the  seller  has  retaken  possession,  and  the  buyer 
has  paid  at  least  fifty  per  cent  of  the  purchase  price 
at  the  time  of  the  retaking,  the  seller  shall  sell  them 
at  public  auction  in  the  state  where  they  were  at  the 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  53 

time  of  the  retaking,  such  sale  to  be  held  not  more 
than  thirty  days  after  the  retaking.  The  seller  shall 
give  to  the  buyer  not  less  than  ten  days'  written 
notice  of  the  sale,  either  personally  or  by  registered 
mail,  directed  to  the  buyer  at  his  last  known  place  of 
business  or  residence.  The  seller  shall  also  give 
notice  of  the  sale  by  at  least  three  notices  posted  in 
different  public  places  within  the  filing  district  where 
the  goods  are  to  be  sold,  at  least  five  days  before  the 
sale.  If  at  the  tune  of  the  retaking  $500  or  more  has 
been  paid  on  the  purchase  price,  the  seller  shall  also 
give  notice  of  the  sale  at  least  five  days  before  the 
sale  by  publication  in  a  newspaper  published  or  hav- 
ing a  general  circulation  within  the  filing  district 
where  the  goods  are  to  be  sold.  The  seller  may  bid 
for  the  goods  at  the  resale.  If  the  goods  are  of  the 
kind  described  in  Section  8,  the  parties  may  fix  in 
the  conditional  sale  contract  the  place  where  the 
goods  shall  be  resold. 

SECTION  20.  [Kesale  at  Option  of  Parties.]  If 
the  buyer  has  not  paid  at  least  fifty  per  cent  of  the 
purchase  price  at  the  time  of  the  retaking,  the  seller 
shall  not  be  under  a  duty  to  resell  the  goods  as  pre- 
scribed in  Section  19,  unless  the  buyer  serves  upon 
the  seller,  within  ten  days  after  the  retaking,  a  writ- 
ten notice  demanding  a  resale,  delivered  personally 
or  by  registered  mail.  If  such  notice  is  served,  the 
resale  shall  take  place  within  thirty  days  after  the 
service,  in  the  manner,  at  the  place  and  upon  the 
notice  prescribed  in  Section  19.  The  seller  may  vol- 
untarily resell  the  goods  for  account  of  the  buyer 
on  compliance  with  the  same  requirements. 


54  MODERN  AMERICAN  LAW  LECTURE 

SECTION  21.  [Proceeds  of  Resale.]  The  proceeds 
of  the  resale  shall  be  applied  (l).to  the  payment  of 
the  expenses  thereof,  (2)  to  the  payment  of  the  ex- 
penses of  retaking,  keeping  and  storing  the  goods, 
(3)  to  the  satisfaction  of  the  balance  due  under  the 
contract.  Any  sum  remaining  after  the  satisfaction 
of  such  claims  shall  be  paid  to  the  buyer. 

SECTION  22.  [Deficiency  on  Resale.]  If  the  pro- 
ceeds of  the  resale  are  not  sufficient  to  defray  the 
expenses  thereof,  and  also  the  expenses  of  retaking, 
keeping  and  storing  the  goods  and  the  balance  due 
upon  the  purchase  price,  the  seller  may  recover  the 
deficiency  from  the  buyer,  or  from  anyone  who  has 
succeeded  to  the  obligations  of  the  buyer. 

SECTION  23.  [Rights  of  Parties  Where  There  Is 
No  Resale.]  Where  there  is  no  resale,  the  seller  may 
retain  the  goods  as  his  own  property  without  obliga- 
tion to  account  to  the  buyer  except  as  provided  in 
Section  25,  and  the  buyer  shall  be  discharged  of  all 
obligation. 

SECTION  24.  [Election  of  Remedies.]  After  the 
retaking  of  possession  as  provided  in  Section  16  the 
buyer  shall  be  liable  for  the  price  only  after  a  resale 
and  only  to  the  extent  provided  in  Section  22 
Neither  the  bringing  of  an  action  by  the  seller  for  the 
recovery  of  the  whole  or  any  part  of  the  price,  nor 
the  recovery  of  judgment  in  such  action  nor  the  col- 
lection of  a  portion  of  the  price,  shall  be  deemed 
inconsistent  with  a  later  retaking  of  the  goods  as  pro- 
vided in  Section  16.  But  such  right  of  retaking  shall 
not  be  exercised  by  the  seller  after  he  has  collected 
the  entire  price,  or  after  he  has  claimed  a  lien  upon 


HOW  TO  DRAFT  A  CONDITIONAL  SALE  55 

the  goods,  or  attached  them,  or  levied  upon  them  as 
the  goods  of  the  buyer. 

SECTION  25.  [Recovery  of  Part  Payments.]  If 
the  seller  fails  to  comply  with  the  provisions  of  Sec- 
tions 18,  19,  20,  21  and  23  after  retaking  the  goods, 
the  buyer  may  recover  from  the  seller  his  actual 
damages,  if  any,  and  in  no  event  less  than  one-fourth 
of  the  sum  of  all  payments  which  have  been  made 
under  the  contract,  with  interest. 

SECTION  26.  [Waiver  of  Statutory  Protection.] 
No  act  or  agreement  of  the  buyer  before  or  at  the 
time  of  the  making  of  the  contract  nor  any  agree- 
ment or  statement  by  the  buyer  in  such  contract, 
shall  constitute  a  valid  waiver  of  the  provisions  of 
Sections  18, 19,  20, 21  and  25 ;  except  that  the  contract 
may  stipulate  that  on  such  default  of  the  buyer  as 
is  provided  for  in  Section  16,  the  seller  may  rescind 
the  conditional  sale,  either  as  to  all  the  goods  or  as  to 
any  part  thereof  for  which  a  specific  price  was  fixed 
in  the  contract.  If  the  contract  thus  provides  for 
rescission,  the  seller  at  his  option  may  retake  such 
goods  without  complying  with  or  being  bound  by 
the  provisions  of  Sections  17  to  25  inclusive,  as  to  the 
goods  retaken,  upon  crediting  the  buyer  with  the  full 
purchase  price  of  those  goods.  So  much  of  this  credit 
as  is  necessary  to  cancel  any  indebtedness  of  the 
buyer  to  the  seller  shall  be  so  applied,  and  the  seller 
shall  repay  to  the  buyer  on  demand  any  surplus  not 
so  required. 

[In  Arizona,  Delaware,  New  Jersey,  South  Dakota 
and  Alaska,  Section  26  does  not  contain  the  words 
beginning  with  "except  that  the,"  etc.,  and  ending 
with  "not  so  required."] 


56  MODERN  AMERICAN  LAW  LECTURE 

SECTION  27.  [Loss  and  Increase.]  After  the  de- 
livery of  the  goods  to  the  buyer  and  prior  to  the 
retaking  of  them  by  the  seller,  the  risk  of  injury 
and  loss  shall  rest  upon  the  buyer.  The  increase  of 
the  goods  shall  be  subject  to  the  same  conditions  as 
the  original  goods. 

SECTION  28.  [Act  Prospective  Only.]  This  act 
shall  not  apply  to  conditional  sales  made  prior  to  the 
time  when  it  takes  effect. 

SECTION  29.  [Rules  for  Cases  Not  Provided  For.] 
In  any  case  not  provided  for  in  this  act  the  rules  of 
law  and  equity,  including  the  law  merchant,  and  in 
particular  those  relating  to  principal  and  agent  and 
to  the  effect  of  fraud,  misrepresentation,  duress  or 
coercion,  mistake,  bankruptcy,  or  other  invalidating 
cause,  shall  continue  to  apply  to  conditional  sales. 

SECTION  30.  [Uniformity  of  Interpretation.]  This 
act  shall  be  so  interpreted  and  construed  as  to  effectu- 
ate its  general  purpose  to  make  uniform  the  law  of 
those  states  which  enact  it. 

SECTION  31.  [Short  Title.]  This  act  may  be 
cited  as  the  Uniform  Conditional  Sales  Act. 

SECTION  32.  [Inconsistent  Laws  Repealed.]  Ex- 
cept so  far  as  they  are  applicable  to  conditional  sales 
made  prior  to  the  time  when  this  act  takes  effect, 
the  following  acts  shall  be  and  hereby  are  repealed. 
[Here  repeal  all  existing  acts  in  the  field  of  con- 
ditional sales.] 

SECTION  33.  [Time  of  Taking  Effect.]  This  act 
shall  take  effect 


r/ora  i 


GAYLAMOUNTB) 
~  KMPHLET  BINDER 
Syracuse,  N.Y, 
Stockton,  Calif. 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


A     000689123     8 


